The annualized short-term interest rate at which the central bank lends money to commercial banks. In effect, repo rate represents interest paid by borrowing banks for using funds offered by the central bank for durations ranging from one day to one year. However, overnight loans are the most common type. Essentially, repos are contracts for the sale and futures repurchase of financial securities, most often treasury bills or notes. The seller (like a commercial bank) repurchases the securities from the buyer (the central bank) for more than the original sale price, with the difference being the repo interest.
August 2, 2024
