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    Repurchase Agreement (Repo) & Reverse Repo

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    Parth Majmudar
    A repo or repurchase agreement is a money market instrument where one party sells securities to another and agrees to repurchase those securities on a future date at a pre-determined price. In a repo transaction, the party buying the securities acts as a lender, while the original seller of the securities acts as the borrower using the securities as collateral for a secured cash loan at a fixed interest rate. The Reserve Bank of India lends money to commercial banks at the repo rate and borrows money from banks by lending securities at the reverse repo rate. Factors like inflation, liquidity, economic growth, and uncertainty can impact repo rates. Changes in repo rates then affect bank deposit rates, bank loan rates, property markets, and

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    Repurchase Agreement (Repo) & Reverse Repo

    Uploaded by

    Parth Majmudar
    39 views10 pages
    A repo or repurchase agreement is a money market instrument where one party sells securities to another and agrees to repurchase those securities on a future date at a pre-determined price. In a repo transaction, the party buying the securities acts as a lender, while the original seller of the securities acts as the borrower using the securities as collateral for a secured cash loan at a fixed interest rate. The Reserve Bank of India lends money to commercial banks at the repo rate and borrows money from banks by lending securities at the reverse repo rate. Factors like inflation, liquidity, economic growth, and uncertainty can impact repo rates. Changes in repo rates then affect bank deposit rates, bank loan rates, property markets, and

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    Vivek Sir Final

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    A repo or repurchase agreement is a money market instrument where one party sells securities to another and agrees to repurchase those securities on a future date at a pre-determined price. In a repo transaction, the party buying the securities acts as a lender, while the original seller of the securities acts as the borrower using the securities as collateral for a secured cash loan at a fixed interest rate. The Reserve Bank of India lends money to commercial banks at the repo rate and borrows money from banks by lending securities at the reverse repo rate. Factors like inflation, liquidity, economic growth, and uncertainty can impact repo rates. Changes in repo rates then affect bank deposit rates, bank loan rates, property markets, and

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    39 views10 pages

    Repurchase Agreement (Repo) & Reverse Repo

    Uploaded by

    Parth Majmudar
    A repo or repurchase agreement is a money market instrument where one party sells securities to another and agrees to repurchase those securities on a future date at a pre-determined price. In a repo transaction, the party buying the securities acts as a lender, while the original seller of the securities acts as the borrower using the securities as collateral for a secured cash loan at a fixed interest rate. The Reserve Bank of India lends money to commercial banks at the repo rate and borrows money from banks by lending securities at the reverse repo rate. Factors like inflation, liquidity, economic growth, and uncertainty can impact repo rates. Changes in repo rates then affect bank deposit rates, bank loan rates, property markets, and

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 10

    REPURCHASE AGREEMENT (REPO) & REVERSE REPO

    WHAT IS REPO
    A repo or Repurchase Agreement is an instrument of money

    market The party who originally buys the securities effectively acts as a lender The original seller is effectively acting as a borrower, using their security as collateral for a secured cash loan at a fixed rate of interest

    TRANSACTION
    Securities Dealer
    Collateral Day 1 Cash (Principal)

    Investor

    Collateral Day Securities 2 Dealer Cash (Principal + Interest)

    Investor

    REPO & REVERSE REPO RATES


    The rate at which the RBI lends money to commercial banks is called repo rate
    In a reverse repo Reserve Bank borrows money from

    banks by lending securities. The interest paid by Reserve Bank in this case is called reverse repo rate.

    CURRENT RATES

    TYPES OF REPO MATURITY


    Overnight: One-day maturity transaction
    Term: Specified end date Open repo: No end date

    FACTORS AFFECTING REPO RATE


    Inflation
    Liquidity Growth in economy Uncertainty

    IMPLICATIONS OF INCREASE OR DECREASE ON REPO RATE


    Bank Deposits rate Bank Loans Property Market Stock Market Investments

    ADVANTAGES OF REPO INSTRUMENTS


    Cheaper funding source
    Safer because it has

    margin as collateral High market liquidity Lucrative for dealers

    THANK YOU
    Hiren Agola
    Gurmeet Anand Hitesh Madnani Dhiraj Kherajani Parth Majmudar Karan Poddar

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