Repo is a process in which the central bank provides short-term funds to commercial banks by purchasing government securities with an agreement to sell them back later at a fixed interest rate. It is used when there is a shortage of money in the market and helps increase liquidity.
On the other hand, Reverse Repo is a process in which the central bank borrows excess funds from commercial banks, allowing banks to deposit their surplus money with the central bank in return for interest. It is used when there is too much money in the market and helps reduce liquidity and control inflation.
As of the most recent Monetary Policy of Nepal Rastra Bank (NRB) for the fiscal year 2025-26, the official policy interest rates include the following key rates:
📌 Repo Rate: 5.5 % (the rate at which the NRB lends to commercial banks)
📌 Reverse Repo Rate: 3.5 % (the rate the NRB pays banks for deposits)
