What is a Repo Rate?

• Repo rate is the rate at which our banks borrows money from Central Bank(RBI). 
• Whenever the banks have any shortage of funds they can borrow it from RBI. 
• A reduction in the repo rate will help banks to get money at a cheaper rate. 
• When the repo rate increases, borrowing from RBI becomes more expensive

The term Repo has been derived from the word repurchase which literally means selling today and buying back at a later time.To be specific  it means Repo trader sells securities, gets funds for a certain specific time, and after this time period. purchases back the securities by paying the previously taken funds along with some interest for the said period. The securities in question basically act as an insurance against borrower's default. A forex money market also works on the same repo terms.

Repo rate is the medium through which RBI infuses funds in the system.
If the repo rate is decreased borrowin of money from RBI(central banks) goes up whereas if it is increased borrowing of money comes down.