The three-day meeting of the Reserve Bank of India (RBI) started on Monday with the Monetary Policy Committee slated to announce its decision on the benchmark repo rate on Wednesday, August 5. But what is repo rate and why is it important?  

Repo rate 

Repo rate is the short-term interest rate at which commercial banks borrow money from RBI to meet their short-term requirements. As banks mostly borrow the money for overnight or up to a couple of weeks, it is also known as overnight lending rate. Banks keep government bonds or securities as collateral with RBI to borrow this short-term loan.