Answer Posted / parag

hello guys,
1st of all i wud lik 2 say congratulations 2 every1 who has
clrd d xam..well guys i wud lik 2 share sumthng wid u..hope
u find d information useful...

Repo/ Reverse Repo It is a transaction in which two parties
agree to sell and repurchase the same security. Under such
an agreement the seller sells specified securities with an
agreement to repurchase the same at a mutually decided
future date and a price. Similarly, the buyer purchases the
securities with an agreement to resell the same to the
seller on an agreed date in future at a predetermined
price. Such a transaction is called a Repo when viewed from
the prospective of the seller of securities (the party
acquiring fund) and Reverse Repo when described from the
point of view of the supplier of funds. Thus, whether a
given agreement is termed as Repo or a Reverse Repo depends
on which party initiated the transaction.

The lender or buyer in a Repo is entitled to receive
compensation for use of funds provided to the counterparty.
Effectively the seller of the security borrows money for a
period of time (Repo period) at a particular rate of
interest mutually agreed with the buyer of the security who
has lent the funds to the seller. The rate of interest
agreed upon is called the Repo rate. The Repo rate is
negotiated by the counterparties independently of the
coupon rate or rates of the underlying securities and is
influenced by overall money market conditions.

The Repo/Reverse Repo transaction can only be done at
Mumbai between parties approved by RBI and in securities as
approved by RBI (Treasury Bills, Central/State Govt
securities).

Uses of Repo
It helps banks to invest surplus cash.
It helps investor achieve money market returns with
sovereign risk.
It helps borrower to raise funds at better rates.
An SLR surplus and CRR deficit bank can use the Repo deals
as a convenient way of adjusting SLR/CRR positions
simultaneously.
RBI uses Repo and Reverse repo as instruments for liquidity
adjustment in the system.

Repo Rate is the rate at which the RBI buys government
securities from the market to infuse liquidity in the
system.

Reverse Repo rate is the rate at which the RBI absorbs
excess bank funds by selling government securities in the
market.

Cash Reserve Ratio is the percentage of bank deposits which
are statutorily parked with the RBI as reserve.


Current Account Transactions where the payments are income
for the recipient. A country's balance of payments on
current account includes trade in goods, or visibles; trade
in services, or invisibles; payments of factor incomes,
including dividends, interests, migrants remittances from
earnings abroad; and international transfers, that is
gifts. Current account is contrasted with capital account,
where transactions do not give rise to incomes, but
represent changes in the form in which assets are held.

Current Account Deficit (/Surplus) An excess of expenditure
(receipts) over receipts (expenditure) on current account
in a country's balance of payments.


Prime Lending Rateis the benchmark rate for all bank loans.
The PLR has been the rate at which banks lend to the best
borrower—one who is the safest or the least likely to
default on the loan. Earlier, banks could not lend below
the base rate, but along with more liberal financial
markets came the freedom for banks to fix rates below the
PLR.

So guys, hope this info wud alleviate sum tensions n
worries dt u hav....n keep posting ur answers...rock
on!!! :-D

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