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Reverse Repo

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Reverse repo
In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.

Reverse Repurchase Agreement
A practice in which a bank or other financial institution buys securities or another asset with the proviso that it will resell these same securities or asset to the same seller for an agreed-upon price on a certain day (often the next day). Investors and financial institutions do this in order to raise short-term capital. Indeed, it is the equivalent of a short-term loan with the securities or asset serving as collateral. A reverse repurchase agreement is the same as a repurchase agreement, but from the perspective of the buyer rather than the seller. It is also called a matched sale transaction or simply a reverse.


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ALTHOUGH in its recent policy meeting, the Reserve Bank of India ( RBI) kept its key policy rates unchanged, namely the cash reserve ratio ( CRR), the repo rate and the reverse repo rate; it has indicated a tighter monetary stance going forward.
64 per cent in September while the reverse repo rate, or the rate at which the central bank absorbs liquidity from the system, declined to 0.
However, the RBI, kept other key rates and ratios like repo, reverse repo and cash reserve ratio unchanged.
 
 
 
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