What is meant by Repo Rate and Reverse Repo Rate.

Answer Posted / avinesh

A Repurchase agreement (also known as a repo or Sale and
Repurchase Agreement) allows a borrower to use a financial
security as collateral for a cash loan at a fixed rate of
interest. In a repo, the borrower agrees to immediately
sell a security to a lender and also agrees to buy the same
security from the lender at a fixed price at some later date
A Reverse Repo is simply the same repurchase agreement from
the buyer's viewpoint, not the seller's. Hence, the seller
executing the transaction would describe it as a 'repo',
while the buyer in the same transaction would describe it
a 'reverse repo'. So 'repo' and 'reverse repo' are exactly
the same kind of transaction, just described from opposite
viewpoints.

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