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For general information purposes #Infopedia When we need money, we borrow from banks who lend us at a certain interest rate called the cost of credit. Similarly, when banks need money to meet their daily obligations, they approach RBI. The rate at which banks borrow money from the RBI by selling their surplus government securities is known as ‘Repo rate’, also known as the Repurchase Rate. Banks enter into an agreement with the RBI to repurchase the same pledged government securities at a future date at a pre-determined price. It is one of the important tools managed by the RBI to control the supply of money and cost of credit in the market. So, higher the repo rate, higher the cost of short-term money and vice versa. Whenever the repo rate is lowered in any monetary policy, there is a possibility of deposit and lending rates coming down, but may not happen every time. #Reporate #RBI #RepurchaseRate #monetarypolicy Read More...
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