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Repurchase and Reverse Repurchase Agreements (Repo and Reverse Repo)

The CBS has recently added new instruments to its set of monetary policy tools namely Repo and Reverse Repo which will facilitate the conduct of its monetary operations. The instrument will primarily enhance the management of short-term fluctuations in the banking system liquidity as well as forming an integral part of CBS Open Market Operations.

A CBS repo transaction involves injection of liquidity whereby the Bank buys securities from banks at a particular price, with an understanding to sell back the same securities to its original owner at the original buying price at a specified future date, under a formal legal agreement (Repurchase Agreement).

A CBS reverse repo transaction, which is the mirror image of a repo transaction, involves the withdrawal of liquidity whereby the Central Bank sells securities to banks at a specific price, with an understanding to repurchase the same securities at the original selling price at a particular future date, under a formal legal agreement (Reverse Repurchase Agreement).

The repo and reverse repo rates will be determined through the auction system and interest payments are computed on the basis of the duration of the agreements and the principal amounts involved.

Weighted Average (RRA) Rates

Maturity Period
Date & Time of Auction Windows1/
21-05-2012 07-11-2012 09-11-2012
Three (3) days 8.81% - - 8.75% 8.00% 8.54%
Five (5) days - - - - - -
Seven (7) days 8.91% - 9.00% 8.81% - -
Fourteen(14) days 7.75% - - - - 9.75%
Twenty One (21) days - - 9.10% 9.03% - 10.27%
Twenty Eight (28) days - - 9.25% 9.18% - 10.50%
Sixty Three (63) days 9.00% - 9.30% - - -
Ninety One (91) days 10.00% - 10.00% 10.00% - -

1/CBS has two operation windows in a day. However, the decision to conduct an operation depends on the Monetary Policy situation on the day.

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