Reverse repos are the same as repos except they are used to describe the other side of the repo transaction, where a party buys securities and then must sell them back at a higher price at the end of the (reverse) repo term. The reverse repo is therefore economically equivalent to a secured “term” deposit or advance.Click to see full answer. Just so, what is repo and reverse repo meaning?Definition of ‘Reverse Repo Rate’ Definition: Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.Also Know, what is repo trade? Repo is short for repurchase agreement, a transaction used to finance ownership of bonds and other debt securities. In a standard repo transaction, a dealer finances its ownership of a bond by borrowing money from a customer on an overnight basis and posting the bond as collateral. Regarding this, what is a reverse repo in banking? A reverse repurchase agreement, or “reverse repo”, is the purchase of securities with the agreement to sell them at a higher price at a specific future date. Repos are classified as a money-market instrument, and they are usually used to raise short-term capital.How does the repo market work?A repo is when one party lends out cash in exchange for a roughly equivalent value of securities, often Treasury notes. This market exists to allow companies that own lots of securities but are short on cash to cheaply borrow money. That difference in price determines the repo rate.
