Which one of the following is not correct about Repo rate?

The Repo rate is the interest rate at which the Central Bank (RBI) provides overnight liquidity to commercial banks against the collateral of government and other approved securities [1]. It is essentially the interest rate charged by the Central Bank on overnight loans [1] and, conversely, the interest rate paid by commercial banks for such borrowing. The mechanism involves a repurchase agreement where banks sell securities to the RBI with a commitment to buy them back at a pre-determined price; the difference between the sale and repurchase price represents the interest cost [1]. While the Repo rate is the interest rate agreed upon in this repurchase contract, it is not the 'cost of collateral security' itself. The collateral (government securities) serves as a guarantee for the loan, whereas the Repo rate is the cost of the funds borrowed [1].

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > The following are the major instruments/tools that RBI uses for conducting its monetary policy: > p. 61