The full form of 'repo' is repurchase operation. What is the significance of repurchase?

Banks sell its securities to RBI to get loans at repo rate, with an agreement to buy back (repurchase) the securities from RBI at a later date

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RBI sell its securities to banks to get loans at repo rate, with an agreement to buy back (repurchase) the securities from banks at a later date

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Both A and B

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None of the above

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Solution

The correct option is A
Banks sell its securities to RBI to get loans at repo rate, with an agreement to buy back (repurchase) the securities from RBI at a later date

Banks sell their securities to RBI to get loans at repo rate, with an agreement to buy back (repurchase) the securities from RBI at a later date. This is the significance of repurchase in repo rate.

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Similar questions

Q. Consider the following statements:
1) Liquidity Adjustment Facility operations help the RBI effectively transmit Interest rate signals to the market.
2) Under the repo or repurchase option, banks borrow money from the RBI via the sale of securities with an agreement to purchase the securities back at a fixed rate at a future date.
Which of the statement(s) given above is/are correct?

Q. Select the correct statement/s about REPO rates:

1) Rate at which RBI lends commercial banks for securities

2) Banks ensure repurchase of securities

Q. An agreement, which in fact is a contract, between the RBI and Banks for the sale and repurchase of Govt securities and short-term treasury bills at a future date and for which the RBI indicates "the interest rate", is generally known as the _______________________.

The RBI adopts various Monetary Policies at different times. If you read in Newspaper that RBI has adopted expansionary policy, what would you conclude by this?

Codes :

2 and 3 only
2, 3 and 4 only
1, 2 and 4 only
1 and 2 only

Q.  Repo rate or repurchase rate is referred to as the rate at which the central bank (RBI) lends money to the commercial banks for meeting short-term fund requirements in order to maintain liquidity

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