What is meant by Repo Rate and Reverse Repo Rate.

Answer Posted / shrikant ramchandra gadade

Discount rate at which a central bank repurchases
government securities from the commercial banks, depending
on the level of money supply it decides to maintain in the
country's monetary system. To temporarily expand the money
supply, the central bank decreases repo rates (so that
banks can swap their holdings of government securities for
cash), to contract the money supply it increases the repo
rates.

Alternatively, the central bank decides on a desired level
of money supply and lets the market determine the
appropriate repo rate.

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