Repo Rate Reverse Repo Rate Meaning Difference in Hindi also. in this post, we are going to share one of the easiest ways to understand the concept of repo rate reverse repo rate bank rate difference also in Hindi.
Suppose I am an individual. What do I do when I am flush with liquidity?
I go to a Bank and get an FD receipt made. I get, say 8%. For a better comprehension of the analogy, replace individual by a Bank. Bank by RBI and FD as Govt. Security, then reverse repo rate is similar to our FD interest rate.
When the banking system is flush with liquidity, they park their fund with RBI and RBI issues govt securities to the bank bearing a certain return, which is nothing but reverse repo rate.
At present, the reverse repo rate is 5.75%. It has not been tweaked in 7th December monetary policy review by RBI.
Now suppose, I ran short of liquidity. I need money for treatment of my son. I go to my Bank. Bank keeps my FD, gives me the loan against deposit at, say 10%(Repo Rate- Replace again individual by a Bank, Bank by RBI and FD as Govt. Security).
When banks need fund, they raise a loan from RBI against the security. The repo rate is the rate of interest charged by RBI on the fund lent to banks. At present, it is 6.25%.
Repo refers to the infusion of liquidity in the banking system and reverses repo for absorption of liquidity from the banking system.
In the case of Repo transaction-Movement of security takes place from Bank to RBI and liquidity from RBI to Bank.
Reverse Repo-Movement of security from RBI to bank and movement of liquidity from Bank to RBI.Presently reverse repo rate is 6%.
RBI has kept the policy rate unchanged on 7th December 2016.