What is meant by Repo Rate and Reverse Repo Rate.

Answer Posted / ranadheer.v

Repo means purchase of one loan and sale of another.Itis
from one day to fourteen days. They involve the sale of
securites against cash with a future buy back agreement.
under such agreement, the seller sells specified securities
with an agreement to repurchase the same at a mutually
decided future date and price. similarly, the buyer purchase
the securities with an agreement to resell the same to the
seller on an agreeed date at a predetermined price. the
transaction is called "REPO. The difference between actually
received and paid is calculated in percentage it is called
"REPO RATE"
Repos are part of open market operations
undertakne to influence short-term liquidity.
Repo is viewed from the perspective of the
seller of the securities, and Reverse Repo when viewed from
the perspective of the buyer of the securities

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