A term repo is a repo of more than one-day duration. The word term denotes longer period. Hence it is a way for banks to avail money from the RBI for more than one-day duration. As in the case of repo, the loan seeking bank should submit securities to the RBI. Since the loan is for more duration, the bank should give higher interest than the repo rate.
Whenever the RBI assess that there is the need for funds for three to 28 days for the banking system, it notifies the term repo auction. Similarly, the central bank also announces the amount it would like to provide to the banks in total. The auction amount will be within 0.75 %of the total deposit in the banking system.
