What is repo rate
Whenever the banks have any shortage of funds they can borrow it from RBI. Repo rate is the rate at which our banks borrow rupees from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.
The rate charged by RBI for its Repo operations is 5.75% and Reverse Repo rate is 3.25%.
When RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap.It takes approved securities as securityand lends money.These types of operations are generally for overnight operations.