What is mean by Repo & Reverse Repo?

Repo

Definition
Discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate.




Reverse Repo

Arrangement where a dealer or broker agrees to buy a security and sell it to a customer (investor) at a higher price on a specified date. These agreement are in effect loans from dealers to investors, collateralized by the securities bought. See also repurchase agreement (repo).