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Repo rate : Bank sells the security to RBI to raise money. When banks sell security , banks promise to buy back the same security from RBI at a predetermined date with an interest at the rate of REPO . It is actually a repurchase agreement.Bank Rate : Bank rate is the rate at which RBI lends money to commercial banks for meeting shortfall for a long period without selling or buying any security.EDIT : Bank rate would be always higher than Repo rate . Current numbers are 8% ( repo rate) and 9% ( Bank rate ). For information on rates , please check this linkReserve Bank of India

Have you heard about CRR, SLR, BILLS OF EXCHANGE, DISCOUNT, REDISCOUNT ? Have you? Well you might be. But I will explain how these things hugs BANK RATE.Bank rate is the rate fixed by central bank at which it will rediscount bills of exchange and government securities held by commercial banks.Lets understand this and understand how it helps in credit controlling.Before we start this we should understand what is bills of exchange? This is nothing but a legal paper written and signed by a purchaser who oblige that he will pay certain amount at a certain date. That means if you have that paper then somebody is going to give you a certain amount at a particular date. But if you need money urgently then what you will do?Simple you will move to a bank and ask them to convert your bills of exchange to cash. And bank will take that bills of exchange and will take money from the maker of that instrument on that particular day. As bank is giving you a loan and providing you service it must get something back. So if your bills of exchange is of 1000 rupees bank will give you only 960 rupees thus by making a margine of 40 rupees. And this process is called as discounting.But remember friends we are not talking about discounting, we are talking about rediscounting. What is that then?Now if bank don't want to keep that instrument till the due date and wanta money then what bank will do?Simply it will move to RBI and will ask them to convert it to money. And RBI will convert that instrument to money and will charge something. Say bank took that instrument worth 1000 to RBI and now RBI will pay bank only 980 rupees. This process is called as rediscounting. And the rate at which RBI rediscounts is called as bank rate. And if you will look carefully at this example bank is still making a profit of 20.Now the question is how RBI controls money in market through it?Simple, if bank rate is more then bank will charge more to its customers and in turn few customer will change their mind and will not discount their bills of exchange and thus money is controlled. And vise versa also holds trueYou guys have heard about CRR and SLR? Don't you? Have you ever thought what is the penalty of non maintainance of CRR and SLR?yes friends that penalty is linked to bank rate too. For first time default it isbank rate +3%Second time default it isbank rate +5%And for more default RBI may cancel its license. Hope I am clear.

HelloMSF is a rate at which the scheduled banks can borrow funds overnight from RBI against government securities. scheduled banks will borrow when there is acute shortage of funds and that’s for very short period of time.Bank rate is a rate at which RBI lends money to commercial banks for meeting shortfall for a long period without selling or buying any security.The basic difference between MSF and Bank rate is time period. MSF for only very short period of time whereas bank rate is for long period of time.Hope this is helpful