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What is meant by Repo Rate and Reverse Repo Rate.

Answer Posted / jitendra ram

Repo rate is a collatarlized lending arrangement in which
commercial banks borrow money from RBI through selling a
securities with a promise to repurchase the same securities
at a predetermined rate and time.Thus rate paid by BANKS to
RBI on such borrowing is called REPO RATE.

In Reverse repo RBI borrow money from Banks through selling
a securites to repurchase the same securities at the agreed
terms and rate. Thus rate paid by RBI on such borrowing to
Banks called REVERESE REPO RATE.

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