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REPO & REVERSE REPO

10 May 2007

hi friends...

Can some one please explain to me about REPO and REVERSE REPO..... i jus want to know wat it is al about?? i jus know that the seller of securities agrees to buy them back at a specific rate and date.... but not sure about its impact and about it in depth....... so i want to know its impact on the economy of a country.... wat has it to do in the growth of a country's economy???

please do help me out... or even if one of you could please let me know about a good web site in which i can the deatils for the same, i could learn it.... please do help..

regards
rajesh

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5 Replies

CA.Madhavan (Chartered Accountant) (942 Points)
Replied 10 May 2007

Repo is an expense(interest) to the Bank and where as in the case of Reverse repo, its an income to the bank.It is one of the tools a bank can use for short term investment.

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Tuteja (29 Points)
Replied 10 May 2007

Rajesh,even i have been wanting to know about the two terms REPO AND REVERSE REPO...but no info as yet...any body with the ans???

Aditya (81 Points)
Replied 10 May 2007

REVERSE REPO IS THE RATE AT WHICH RBI BORROWS MONEY FROM BANK, REPO IS OPPOSITE TO IT. REPO MEANS REPORTING RATE. THESE IS USED BY RBI OR CENTRAL BANK TO CONTROL LIQUIDITY.

Taranjit Singh (Chartered Accountant) (6108 Points)
Replied 31 March 2009

A Repo is a repurchase agreement or a ready forward sale. Under this transaction a holder of securities (Govt Bonds) sells them to an investor with an agreement to repurchase them at a fixed price on a fixed date.

Taranjit Singh (Chartered Accountant) (6108 Points)
Replied 31 March 2009

On the otherhand, Reverse Repo means injecting liquidity into the market as RBI repurchase the Goverment security from banks as these Government securities were sold by RBI with the agreement of repurchase.