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

Tell me difference between repo rate,reverse repo rate and bank rate in banking terminology?

• Answer:

  repo rate is the discount rate at which a central bank (the fed) repurchases government securities from the commercial banks (BofA...), depending on the level of money supply it (the fed) decides to maintain in the country's monetary system. Reverse repo is an arrangement where a dealer or broker agrees to buy a security and sell it to a customer (investor) at a higher price on a specified date. Bank rate is basically prime rate set by the fed. This is the rate the fed charges commercial banks to borrow money on a short term (usually overnight) basis. Banks work off of the spread. They give money to depositors at 4% and turn around and lend that money to others that want to buy a home or expand their business at 6-8% or higher depending on the risk. If they lend more money than they take in on a given day they may have to borrow money from the fed on a short term basis which would be the bank rate. I hope that helps.