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All You Need To Know About Repo RateAll-about-Repo-Rate

Check out all you need to know about the repo rates at Bajaj Housing Finance. To know how to apply and the documents required to apply for Loan, check out this amazing presentation. You can easily apply for LAP through our official website.<br>Visit:- https://www.bajajhousingfinance.in/repo-rate

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All You Need To Know About Repo RateAll-about-Repo-Rate

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  1. All You Need To Know About Repo Rate

  2. What is a Repo Rate? • Repo rate stands for “repurchasing option.” • Suppose a bank is short of funds and cannot meet its obligations. It goes to the RBI to borrow funds. • The bank which borrows from RBI is bound by certain rules. • The bank has to offer collateral to the RBI in return. • The RBI charges certain rate of interest from the borrower bank. This rate is called “Repo Rate”. • Repo Rate keeps a check on inflation in the country by keeping a check on its banks.

  3. In short, Repo rate is • The rate of interest at which the RBI lends money to banks. • RBI control inflation by this method. • Banks sell their securities to the RBI and buy them back at a predetermined rate at a later date.

  4. How does Repo Rate work? • When a bank goes to the RBI for a fund, it has to agree to pay a rate of interest. • It must also mortgage its treasury bills of equal value for the overnight loan. • The agreement states that the treasury bills will be bought back by the bank at a predetermined rate. • Every bank is mandated to have a certain amount of liquid cash. • Loans are given by the RBI against valid securities over and above mandated liquid cash or cash reserve ratio (CRR).

  5. A part of the cash reserve ratio of every bank is deposited with the RBI to ensure a check on inflation. • If the inflation level rises beyond a certain point, the central bank raises the CRR to gain control over the spending of individual banks. • When there is less to spend for the bank, people find it difficult to get personal loans.

  6. How Repo Rate affects the economy? • The repo rate is a way adopted by RBI to control the economy of India. • It controls the rate of interest banks charge their customers. • The repo rate controls the money supply, the rate of inflation, and liquidity. • When the inflation rate is high, the RBI tries to restrict the money supply in the market by hiking the repo rate.

  7. When the repo rate is high, then • The banks charge their customers a higher rate of interest. • Fewer loans are avail by people, industrialists and businessmen. • There is less investment made. • Hence, there is less money in the market.  • The negative impact is in the slowing down of the economy. • However, it brings down the rate of inflation.

  8. Repo Rate VS Reverse Repo Rate

  9. GET IN TOUCH BAJAJ HOUSING FINANCE LIMITED Cerebrum IT Park, 5th Floor B2 Building, Holy Cross Rd, Kalyani Nagar, Pune, Maharashtra 411014 Phone number : +91 8698010101 Email id: bhflwecare@bajajfinserv.in

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