RBI liquidity guide: Repo and reverse repo explained

The Reserve Bank of India manages the amount of cash available in the banking system. Repo and reverse repo operations temporarily move cash between the RBI and eligible institutions.

Repo and reverse repo in plain language

In a repo operation, eligible institutions borrow cash from the RBI against securities. This adds cash to the system for the term of the operation. In a reverse repo, eligible institutions place cash with the RBI and receive it back when the transaction reverses.

What makes the rate variable?

Participants submit bids at different rates in a variable-rate auction. The cut-off marks the boundary for acceptance, and the weighted-average rate describes the accepted bids as a group. For an example, read the 12 November RBI auction result.

Follow the RBI’s operation notice for the auction window, announced amount and reversal date. The result reports the accepted amount and rates.