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What is the difference between bank rate and reverse repo rate?

What is the difference between Bank rate and repo rate fixed by RBI?

  • Both 'bank rate' and 'repo rate' is the rate at which RBI lends to other banks. Then what is the difference between this two terminology parallely used by RBI?

  • Answer:

    The repo rate is the rate at which the RBI borrows from the banks, while the bank rate is the rate at which the banks borrow from the RBI.

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hey the repo rates n bank rates r essentially the same with a slight variation. If the commercial banks borrow money from the central bank it is classified as bank rate. On the other hand, if the securities of a bank are sold to the central bank with a promise to repurchase at a specified price it is termed as repo or repurchasing agreement. It is akin to selling zero coupon bonds to central bank.

karthic

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