WHAT IS EXACTLY REPORATE?I DOHAVE THE BASIC KNOWLEDGE BUT I WANNA THE FACTORS AFFECTING REPORATE EXPLAIN ME IN DETAIL
CA Shree Jain
(Chartered Accountant)
(1572 Points)
Replied 17 September 2008
Repo and Reverse Repo are tools available in the hands of RBI to manage the liquidity in the system. It either injects liquidity into the market if the conditions are tight or sucks out liquidity if the liquidity is excess in the system through the Repo and Reverse Repo mechanism, besides a host of other measures. Now in REPO RBI injects liquidity into the system i.e. it purchases the securities from the banks and lends money to them to ease their liquidity crunch. The rate charged by it for lending money is the REPO rate. Reverse REPO is the opposite of REPO: When liquidity is excess in the system. RBI sucks it out by Reverse REPO by lending securities and taking out money from banks. The rate charged for it is the Reverse Repo rate. These rates, form the bottom and the top of the Call money lending/borrowing of the banks. The call money rates generally fall in between this corridor.
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