CBI to use Repurchase Agreement (Repo) for 1st time

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities.

In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price. That small difference in price is the implicit overnight interest rate. Repos are typically used to raise short-term capital.

They are also a common tool of central bank open market operations.

For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

Repurchase agreements are generally considered safe investments because the security in question functions as the collateral.

HJ/TSN2372712