Bank Rate

• Central banks lend money to national banks. The bank rate is the interest rate national banks must pay in exchange for the money.
  
  

Repo Rate

• Repo is another word for repurchase. The repo rate is the interest rate paid on a repurchase agreement. Repurchase agreements are short-term loans that work as follows: Party A agrees to buy securities from party B if party B agrees to repurchase them at the original selling price plus interest. The interest is the repo rate, the cash from the purchase is the loan amount and the security is the loan's collateral.
  
  

Distinction

• The difference between the bank rate and the repo rate is collateral. The repurchase agreement associated with the repo rate is collateralized by a security. The bank rate, on the other hand, is not collateralized. The result is that the bank rate is typically higher than the repo rate.