bizheadz® news feed
May 22, 2020 · 2 min read •
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.
This is a BizHeadz® curated property.
Get your articles published here. Write to us now to email@example.com
To read more articles, visit Articles
To publish your articles, visit Publish
Jazah Co-Founder, Indepth Jr Know more about how to use Indepth Jr from its Co-Founder Indepth Jr is an online…
Roshni Franciss T Student Months back one of my seniors at the college who already completed his post-graduation in 2018…
Jisham Ashraf Founder, Indepth Jr Indepth Jr is an online platform to skill kids in the Grade 5-12 by providing…
– – Athira Madhav is a multimedia producer working at Asiaville Malayalam. Her innate ability to present complex news in…
– K&K Techs is a YouTube channel run by Alappuzha based vlogger Saiju Thomas. The channel has around 1.3 lakh…
– Civil Service Examination is conducted by the Union Public Service Commission. To know more about exam visit UPSC. How…