Context
The pause in the rate hike cycle by the Reserve Bank of India (RBI) is now being seen as a favourable step to make the growth-inflation trade-off lean more in favour of the growth, especially in the backdrop of emerging concerns over slowing consumption.
About the move:
What is Repo rate?
Components of Repo Rate:
Impacts of repo rate:
Bank rate Vs. Repo rate:
Parameter |
Bank Rate |
Repo Rate |
Meaning |
The Bank Rate is applied to loans made by the central bank to commercial banks. |
Repo Rate is applied to the central bank's repurchase of securities sold by commercial banks. |
Collateral |
No collateral is required |
Securities, bonds and agreements are given as collateral |
Impact |
Directly impact customers as it impacts long term lending. |
The Repo rate is handled by the banks and doesn’t impact the customers directly. |
Rate |
Higher than Repo due to no collateral and long term nature. |
Lower than Bank Rate as there is a collateral and repurchase obligation. |
Duration of loan |
Bank rate caters to long term requirements of commercial banks. |
Repo Rate focuses on short term financial lending. |
Verifying, please be patient.