GROUP 4

ECONOMIC INDICES

REPURCHASE AGREEMENT
(REPO RATE) & REVERSE
REPO RATE
 WHAT IS REPO
• A repo or Repurchase Agreement is an instrument of money
market.
• The party who originally buys the securities effectively acts as
a lender.
• The original seller is effectively acting as a borrower, using
their security as collateral for a secured cash loan at a fixed
rate of interest.

What is Repo rate?

• The rate at which the RBI lends money to commercial banks is
called repo rate.
 REVERSE REPO
• In a reverse repo Reserve Bank borrows
money from banks by lending securities.
The interest paid by Reserve Bank in this
case is called reverse repo rate.
 TYPES OF REPO MATURITY
• Overnight: One-day maturity transaction

• Term: Specified end date

• Open repo: No end date

 FACTORS AFFECTING
REPO RATE
• Inflation
• Liquidity
• Monetary Policy
• Growth in economy
• Uncertainty
 TIME LINES OF REPO RATE
• 5-Jan-2009
• 5.50
• 12-Jun-2008 • 5-March-2009
• 8.00 • 5.00
• 25-Jun-2008 • 21-April-2009
• 8.50 • 4.75
• 30-Jul-2008 • 19-March-2010
• 9.00 • 5.00
• 20-Oct-2008 • 20-Apr-2010
• 8.00 • 5.25
• 3-Nov-2008 • 02-July-2010
• 7.50 • 5.50
• 8-Dec-2008 • 27-July-2010
• 6.50 • 5.75
• 16-Sept-2010
• 6.00
IMPLICATIONS OF INCREASE
OR DECREASE ON REPO
RATE
• Bank Deposits rate.
• Bank Loans.
• Property Market.
• Stock Market Investments.