A repo or repurchase agreement: is an instrument of money market. Repo is a collateralized lending i.e. the commercial banks which borrow money from central bank by selling securities to meet short term needs with an agreement to repurchase the same at a predetermined rate and date. The central bank charges some interest rate on the cash borrowed by banks, but this rate (called repo rate) will be less than the interest rate on bonds.
Reverse
repo: In a reverse repo central bank borrows money from commercial banks by
lending securities. The interest paid by central bank in this case is called
reverse repo rate.