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What are Repo and Reverse Repo rates? Explained

Repo and Reverse Repo rates: The Reserve Bank of India develops and implements monetary policies with the express intent of regulating the amount of money available in the economy in order to promote different facets of economic growth. Such monetary policies’ main goals are to encourage economic growth by stabilising prices, controlling the amount of bank lending, enhancing the effectiveness of the financial system, encouraging investment, and broadening the range of financial markets. In this sense, the repo rate and reverse repo rate are monetary policy tools used by the RBI to assist manage the amount of money in the economy.

Repo Rate

Repo Rate Definition

Repo is an acronym for “repurchase agreement.” Repo is a short-term, collateral-backed borrowing mechanism, and repo rate refers to the interest rate charged for such borrowings. Repo rate is the rate at which the Reserve Bank of India lends money to Indian commercial banks when such banks are short on cash. Commercial banks sell Reserve Bank of India government securities and bonds with the understanding that they will later purchase those same securities and bonds from the latter at a predetermined price that will include interest.

Recent Changes in Repo Rate

Effective From Repo Rate Percentage Change
September 2022 5.90% 0.5%
August 2022 5.40% 0.5%
June 2022 4.90% 0.5%
May 2022 4.40% 0.4%
October 2020 4.00% 0.00%
August 2020 4.00% 0.00%
May 2020 4.00% 0.40%
March 2020 4.40% 0.75%
February 2020 5.15% 0.25%

Current Repo Rate

The Current Repo rate is 5.90%. It was changed and done effective by the Reserve Bank of India from 30 September 2022.

Reverse Repo Rate

Reverse Repo Rate Definition

The reverse repo rate, as its name implies, is opposite in nature to the repo rate. The Reserve Bank of India borrows money from the nation’s commercial banks at the reverse repo rate. In other words, it is the rate at which Indian commercial banks often store their excess cash for a short period of time at the Reserve Bank of India.

Recent Changes in Repo Rate

Effective From Repo Rate Percentage Change
September 2022 3.35% 0.40%
May 2022 3.75% 0.40%
April 2022 3.35% 0.00%
May 2020 3.35% 0.65%
March 2020 4.00% 0.90%
October 2019 4,90% 0.25%
August 2019 5.15% 0.50%

Current Reverse Repo Rate

The Current Repo rate is 3.35%. It was changed and done effective by the Reserve Bank of India from 30 September 2022.

Current Repo, Reverse Repo and Othe rates of RBI’s Monetary Policy

Repo Rate 5.90%
Bank Rate 6.15%
Reverse Repo Rate 3.35%
Marginal Standing Facility Rate 6.15%
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Repo and Reverse Repo Rate: FAQs

Ques. What is reverse repo rate now?

Ans. The MPC opted to maintain the reverse repo rate at 3.35% during its meeting. Additionally modified and now at 6.15%, the Bank Rate and the marginal standing facility (MSF) rate.

Ques. What is repo rate?

Ans. The Reserve Bank of India (RBI) charges commercial banks a loan interest rate known as the repo rate. Repurchase Agreement or Repurchasing Option is referred to as “repo.” Banks offer acceptable securities to the Reserve Bank of India (RBI) in order to acquire loans from the RBI.

Ques. What is SLR and CRR rate?

Ans. The CRR is a reserve that banks maintain with the RBI. It is a portion of bank deposits that are kept in cash. SLR is a required reserve that commercial banks are required to keep on hand. It represents a portion of the net demand and time liabilities held as authorised securities by commercial banks.

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FAQs

What is reverse repo rate now?

The MPC opted to maintain the reverse repo rate at 3.35% during its meeting. Additionally modified and now at 6.15%, the Bank Rate and the marginal standing facility (MSF) rate.

What is repo rate?

The Reserve Bank of India (RBI) charges commercial banks a loan interest rate known as the repo rate. Repurchase Agreement or Repurchasing Option is referred to as "repo." Banks offer acceptable securities to the Reserve Bank of India (RBI) in order to acquire loans from the RBI.

What is SLR and CRR rate?

The CRR is a reserve that banks maintain with the RBI. It is a portion of bank deposits that are kept in cash. SLR is a required reserve that commercial banks are required to keep on hand. It represents a portion of the net demand and time liabilities held as authorised securities by commercial banks.

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