What is a Repo and a Reverse Repo?
A Repo deal is one where eligible parties enter into a contract with another to borrow money against at a pre-determined rate against the collateral of eligible security for a specified period of time. The legal title of the security does change. The motive of the deal is to fund a position. Though the mechanics essentially remain the same and the contract virtually remains the same, in case of a reverse Repo deal the underlying motive of the deal is to meet the security / instrument specific needs or to lend the money. Indian Repo Market is governed by Reserve Bank of India. At present Repo is permitted between permitted 64 players against Central & State Government Securities (including T-Bills) only at Mumbai.
