Why Repo rate is called Repurchase rate (Class 12)
Repo Rate:- The rate at which the RBI (Central Bank) offers short-period loans to commercial banks by buying government securities in the open market.
In fact, the Repo rate is the Repurchase Rate.
A repurchase agreement is signed by both parties stating that the securities will be repurchased by the commercial banks on a given date at a predetermined price.
In other words, the RBI issues a loan cheque to the commercial banks by buying from them government securities. However, it carries the agreement of repurchase of securities by the commercial banks at a predetermined date and a predetermined price.
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