Repo Rate and Reverse Repo rates in Indian Banking

Repo Rate :-

• The rate at which banks borrow money from the RBI by selling their surplus government securities to RBI is known as "Repo Rate.
• Repo Rate is the rate at which RBI lends money to commercial banks against the pledge of government securities whenever the banks are in need of funds to meet their day-to-day obligations.
• Banks enter into an agreement with the RBI to repurchase the same pledged government securities at a future date at a pre-determined price. RBI manages this repo rate which is the cost of credit for the bank.
• If the repo rate is low then banks can charge lower interest rates on the loans taken by us. 

Reverse Repo Rate :-

• Reverse repo rate is the rate of interest offered by RBI, when banks deposit their surplus funds with the RBI for short periods.
• When banks have surplus funds but have no lending (or) investment options, they deposit such funds with RBI. Banks earn interest on such funds.

1. Present   Repo Rate :- 6.25 %
2. Present  Reverse Repo Rate :- 5.75 %