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Repo

Repo and reverse repo rates are tools used by the Reserve Bank of India to regulate money supply and liquidity. A repo is when the RBI lends money to banks by buying securities from them with an agreement to sell back, while a reverse repo is when the RBI borrows money from banks by selling securities to them and agreeing to buy them back. The repo rate influences other interest rates like bank deposit rates and loan rates, and impacts sectors like property and stock markets.

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Monil Visariya
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2K views7 pages

Repo

Repo and reverse repo rates are tools used by the Reserve Bank of India to regulate money supply and liquidity. A repo is when the RBI lends money to banks by buying securities from them with an agreement to sell back, while a reverse repo is when the RBI borrows money from banks by selling securities to them and agreeing to buy them back. The repo rate influences other interest rates like bank deposit rates and loan rates, and impacts sectors like property and stock markets.

Uploaded by

Monil Visariya
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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GROUP 4

ECONOMIC INDICES

REPURCHASE AGREEMENT
(REPO RATE) & REVERSE
REPO RATE
WHAT IS REPO
• A repo or Repurchase Agreement is an instrument of money
market.
• The party who originally buys the securities effectively acts as
a lender.
• The original seller is effectively acting as a borrower, using
their security as collateral for a secured cash loan at a fixed
rate of interest.

What is Repo rate?


• The rate at which the RBI lends money to commercial banks is
called repo rate.
REVERSE REPO
• In a reverse repo Reserve Bank borrows
money from banks by lending securities.
The interest paid by Reserve Bank in this
case is called reverse repo rate.
TYPES OF REPO MATURITY
• Overnight: One-day maturity transaction

• Term: Specified end date

• Open repo: No end date


FACTORS AFFECTING
REPO RATE
• Inflation
• Liquidity
• Monetary Policy
• Growth in economy
• Uncertainty
TIME LINES OF REPO RATE
• 5-Jan-2009
• 5.50
• 12-Jun-2008 • 5-March-2009
• 8.00 • 5.00
• 25-Jun-2008 • 21-April-2009
• 8.50 • 4.75
• 30-Jul-2008 • 19-March-2010
• 9.00 • 5.00
• 20-Oct-2008 • 20-Apr-2010
• 8.00 • 5.25
• 3-Nov-2008 • 02-July-2010
• 7.50 • 5.50
• 8-Dec-2008 • 27-July-2010
• 6.50 • 5.75
• 16-Sept-2010
• 6.00
IMPLICATIONS OF INCREASE
OR DECREASE ON REPO
RATE
• Bank Deposits rate.
• Bank Loans.
• Property Market.
• Stock Market Investments.

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