What is a repo loan?
In: Economics
So Consider the central bank of your nation versus the normal banks in your nation.
When The Central bank feels that there are funds needed in the economy, then it disburses funds to the banks so that money supply increases and purchases their securities in exchange of giving the funds (hence technically it’s a loan given by the Central bank) the rate at which this loan is given is called the Repo Rate [meaning the banks agreeing to REPURCHASE (hence the word repo) these securities from the central bank].
Reverse Repo is exactly the opposite of repo and practiced when Central bank feels that there is excess money in the economy.
Generally these loans are for very short period of time (as low as one day!)
Latest Answers