REPO Rate – Repurchase Agreement Rate
Repo rate is the rate at which banks can borrow money from RBI, by offering a security of central Government securities. Whenever banks have any shortage of funds they can borrow from the RBI.
Reserve bank charges some interest rate on the cash borrowed by banks. This interest rate is called ‘repo rate’. A reduction in the Repurchase Agreement Rate helps banks get money at a cheaper rate and vice versa.