bizheadz® news feed

May 22, 2020 · 2 min read 

47

A repurchase agreement (repo) rate is the rate at which the apex bank of the country lends money to commercial banks. Repo rate, devised by monetary authorities, is a monetary policy tool to control inflation.

Investopedia defines repo rate as the following

“A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price. That small difference in price is the implicit overnight interest rate. Repos are typically used to raise short-term capital. They are also a common tool of central bank open market operations.”

“For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.”

Due to extended lock down, the Reserve Bank of India had recently cut key lending rate by 40 basis points to 4%.

What are the effects of such a policy decision

Lending rates would come down making loans cheaper. 

It also affects deposit rates. Savings would be no more profitable.

Reverse repo automatically adjusts to 3.35% from 3.75%.

Help boost growth if combined with a good fiscal policy.

——————————————————————————————————————–

image: KaiPilger/Pixabay

This is a BizHeadz® curated property.

Get your articles published here. Write to us now to info@bizheadz.com

To read more articles, visit Articles

To publish your articles, visit Publish

Recent Articles

Blog Image
31 October 2020
Indepth Jr is making its mark in the growing ed-tech space.

Jazah Co-Founder, Indepth Jr Know more about how to use Indepth Jr from its Co-Founder Indepth Jr is an online…



Blog Image
Flow of Indian students is an alert!

Roshni Franciss T Student Months back one of my seniors at the college who already completed his post-graduation in 2018…



Blog Image
30 October 2020
In the middle of a pandemic, a request to skill yourself.

Jisham Ashraf Founder, Indepth Jr Indepth Jr is an online platform to skill kids in the Grade 5-12 by providing…



Blog Image
21 June 2020
Redefining Journalism: A talk with Asiaville’s Athira Madhav

– – Athira Madhav is a multimedia producer working at Asiaville Malayalam. Her innate ability to present complex news in…



Blog Image
10 June 2020
Interview with the man who made ‘boat out of a saree’

– K&K Techs is a YouTube channel run by Alappuzha based vlogger Saiju Thomas. The channel has around 1.3 lakh…



Blog Image
8 June 2020
UPSC CSE 2020: How to become an IAS officer

– Civil Service Examination is conducted by the Union Public Service Commission. To know more about exam visit UPSC. How…