Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank.
Whenever a bank has a shortage of funds they can typically borrow it from the central bank based on the monetary policy of the country.
The borrowing is commonly done via Repos (Repurchase) where the Repo rate is the rate at which the central bank lends short-term money to the banks against securities. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from the central bank becomes more expensive. It is more applicable when there is a liquidity crunch in the market.
The reverse repo rate is the rate at which the banks can park surplus funds with reserve bank, while the repo rate is the rate at which the banks borrow from the central bank. It is mostly done when there is surplus liquidity in the market.
Read more about Bank Rate: How The Rate Is Determined and Its Impact On The Economy
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