Full formBanking & Finance
REPOstands forRepurchase Option
Full Form of REPO
What is REPO?
REPO stands for Repurchase Option, commonly referred to as the repo rate in Indian banking. It is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks against government securities. When banks need short-term funds, they sell securities to the RBI with an agreement to repurchase them at a future date at a predetermined price. The repo rate is a key monetary policy tool used by the RBI to control inflation and manage liquidity in the economy. An increase in the repo rate makes borrowing costlier for banks, which then pass on higher interest rates to consumers, thereby reducing spending and curbing inflation. Conversely, a decrease in the repo rate encourages borrowing and spending, stimulating economic growth. The repo rate is revised periodically during the RBI's Monetary Policy Committee (MPC) meetings. For competitive exams like RBI Grade B, IBPS, and UPSC, understanding the repo rate's impact on inflation, GDP, and banking operations is crucial. It is also closely watched by investors and financial markets for signals on the direction of interest rates.
REPO का फुल फॉर्म
पुनर्खरीद विकल्प
Example
The Reserve Bank of India announced a 25 basis point hike in the REPO rate to 6.50% to control rising inflation.
REPO — frequently asked questions
What is the full form of REPO?
REPO stands for Repurchase Option, commonly known as the repo rate in banking.
How does the REPO rate affect home loan interest rates?
When the RBI increases the REPO rate, banks raise their lending rates, making home loans more expensive. A cut in the REPO rate reduces loan costs.
What is the difference between REPO rate and Reverse REPO rate?
REPO rate is the rate at which RBI lends to banks, while Reverse REPO rate is the rate at which RBI borrows from banks. Reverse REPO is usually lower than REPO.