Repo Rate - Definition
Repo rate (also known as Repurchase Rate) is the official rate of borrowing from central banks. Repo rates are used to control Liquidity
within a country as part of its Monetary Policy
and come into play when banks borrow money from the National or Federal Reserve.
For example, when the Federal Reserve wants to increase the supply of money in the country, the Central Bank
decreases the repo rate allowing banks to borrow money from the Central Bank or Federal Reserve at a lower rate. As a corollary to reduce liquidity (during times of higher than acceptable Inflation
) the repo rate is increased. This reduces the Money Supply
in the market as borrowing rates rise.
Repo rate is a term commonly used in economic and financial circles of India. Here the Reserve Bank of India (RBI) controls it, where a reduction in the repo rates help banks borrow money at a cheaper rate, while an increase makes borrowing more expensive.
Terms near "Repo Rate"
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