Reverse Repo Normalisation
Recently, State Bank of India stated that it believes the stage is set for a Reverse Repo Normalisation in India.
About Repo and Reverse Repo Rate
Repo Rate
- The term ‘Repo’ stands for ‘Repurchase Agreement’. It is the rate at which the Reserve Bank of India (RBI) gives loans to commercial banks against government securities. Reverse repo rate is the interest that RBI pays to banks for the funds that the banks deposit with it.
Implications
- If the repo rate increases, it means banks are getting funds from RBI at a higher cost.
- This, in turn, will mean that banks ....
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