Repo Rate and Bank Rate: Difference

Repo rate is the rate at which our banks borrow rupees from RBI whenever they have shortage of funds. Repo rate is basically a short-term measure and it refers to short-term loans and used for controlling the amount of money in the market, bank rate is a long-term measure and is governed by the long-term monetary policies of the governing bank concerned. In broader term, bank rate is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. RBI uses this tool to control the money supply. Current bank rate at which RBI lends to Banks is 6%.

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