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repo rate

Repo rate is effectively the interest rate at which central banks lend money to banks. ‘repo’ is an abbreviation used for repurchase agreement. It is used as a form of short-term borrowing by the banks who sell government securities (usually short-term securities) to the central bank and agree to buy them back at a slightly higher price at a fixed time in the future. Usually it is used as a way of borrowing money overnight. The central bank sets the repo rate.

Central banks may also operate a reverse repo facility.

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