Repo Rate


Repo rate is a key instrument through which the central bank (RBI) manages the money supply, inflation, and economic stability by influencing the cost and availability of short-term funds to commercial banks.

Raising the repo rate makes borrowing more expensive, encouraging banks to lend less, which can help in controlling inflationary pressures.

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Conversely, a decrease in the Repo Rate stimulates lending, boosting economic growth. The RBI uses this rate to achieve its dual objectives of maintaining price stability and promoting healthy economic growth. It is reviewed every 6th or 12th month by the RBI.

Table of Contents

Current Repo Rate in India

The current repo rate in India, as determined by the Reserve Bank of India, is a vital piece of information for businesses, investors, and the general public. It directly influences borrowing costs and economic activity.

Type of Rate Current Rate
Repo Rate 6.50%
Bank Rate 6.75%
Reverse Repo Rate 3.35%
Marginal Standing Facility Rate 6.75%
Note: The rates are subject to change bi-monthly and you are advised to verify the same with the RBI governed sites for

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Reserve Bank of India Repo Rate

The Reserve Bank of India (RBI) plays a pivotal role in the country's financial system. The RBI uses the repo rate to manage liquidity in the banking system and maintain monetary stability. By adjusting the repo rate, the RBI can either encourage borrowing and spending or rein in inflation and excess liquidity.

Reserve Bank of India's repo rate: 4% p.a.

Difference Between Repo Rate & Reverse Repo Rate

Understanding the difference between the repo rate and the reverse repo rate is essential for grasping monetary policy:

Repo Rate Reverse Repo Rate
The rate at which the RBI lends to commercial banks. The rate at which the RBI borrows money from commercial banks.
Used to control liquidity Used to absorb excess liquidity
Reduces the borrowing costs Incentivizes while accumulating the funds to control inflation
Banks can use these transactions for borrowing money providing securities They lend money to RBI in exchange of securities.
Lower repo rate lowers the lending rates Here, the interest rate ( IR ) on depositis and other short-term investments of banks change with reverse repo rate.

Role of Repo Rate in Monetary Policy

Importance of Repo Rate in Controlling Inflation

The repo rate is a primary tool in controlling inflation. By increasing the repo rate, the RBI makes borrowing more expensive, which reduces spending and investment, thereby lowering inflation. Conversely, lowering the repo rate stimulates economic activity by making loans cheaper.

Impact of Repo Rate on Economic Growth

The repo rate also impacts economic growth. A lower repo rate encourages businesses and consumers to borrow and spend, leading to economic expansion. On the other hand, a higher repo rate can slow down economic growth by making borrowing more expensive.

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Factors Influencing Repo Rate

External Factors such as Economic Indicators are listed below that influence particularly the repo rate:

Economic Factors External Fators
- Inflation rates - Global economic conditions
- GDP growth rates - Crude oil prices
- Employment levels - International trade dynamics
- Currency exchange rates T- Geopolitical events

Implications of Repo Rate Changes

Effects on Borrowing and Lending Rates

Repo Rate are pivotal and change drivers in economy, impacting the borrowing and the lending rates, directly. An increase in the repo rate usually leads to higher interest rates on loans, making borrowing more expensive. Conversely, a decrease in the repo rate lowers interest rates, encouraging borrowing.

This is evident when the central bank wants to stimulate the economy, a lower repo rate may decrease commercial bank rates thus making it easy to borrow the money. On the other hand, if the RBI wants to curb inflation, a higher repo rate can make it expensive for commercial banks to borrow money.

Impact on Financial Markets and Investments

Naturally, any Repo rate changes also impact financial markets and investments. Higher repo rates can lead to a decline in stock market performance as borrowing costs rise, whereas lower rates can boost market activity and investment.

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Historical Repo Rates

Analysis of Repo Rate Changes Over Period

Date RBI Repo Rate
8th June 2024 6.50%
5th April 2024 6.50%
8th February 2024 6.50%
8th December 2023 6.50%
10th August, 2023 6.50%

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Analyzing historical repo rates provides insights into the RBI's monetary policy and economic conditions over time. Historical data reveals trends and patterns that help predict future rate movements and their potential impact on the economy.

Besides Repo Rates, you can also check other FD schemes. Check the table below with links for details

SBI FD Interest Rates RBL Bank FD Interest Rates
HDFC Bank FD Interest Rates Central Bank of India FD Interest Rates
Axis Bank FD Interest Rates Karnataka Bank FD Interest Rates
ICICI Bank FD Interest Rates Bank of Maharashtra FD Interest Rates
PNB FD Interest Rates Federal Bank FD Interest Rates

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Check the Recurring Deposit From the Table Below

SBI RD Interest Rates Central Bank of India RD Interest Rates
HDFC Bank RD Interest Rates Indian Overseas Bank RD Interest Rates
Axis Bank RD Interest Rates Union Bank RD Interest Rates
ICICI Bank RD Interest Rates Yes Bank RD Interest Rates
PNB RD Interest Rates Bank of India RD Interest Rates

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You can also check other related gold topics

Gold Loan Gold Saving Scheme
Loan Against Gold Gold Rate Trend in India
Why is Gold Price Increasing in India Will Gold Price Decrease in India
Best Banks for Gold Loan Rupeek Gold Loans
Sovereign Gold Bonds Sovereign Gold Bond Upcoming Issue

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Frequently Asked Questions

The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks in case of any shortfall/imbalance of funds. It is a tool used by the central bank to control liquidity, inflation, and the overall money supply in the economy.

The repo rate is easy to be determined by the Reserve Bank of India during its bi-monthly Monetary Policy Committee (MPC) meetings. This decision is based on various economic indicators such as inflation, GDP growth, employment levels, and even global economic conditions.

The repo rate plays a crucial role in the economy by influencing borrowing and lending rates, controlling inflation, and thus managing economic growth. By adjusting the repo rate, the RBI can either encourage spending and investment or control inflation and excess liquidity.

When the repo rate is increased, borrowing costs for banks rise, as they have to pay a higher interest rate to borrow funds from the RBI. This increase is often passed on to customers through higher interest rates on loans and mortgages. Conversely, a decrease in the repo rate lowers borrowing costs for banks.

It is reviewed and can be changed during the Reserve Bank of India's bi-monthly Monetary Policy Committee meetings. However, the rate can also be adjusted outside these meetings if the RBI finds it necessary to update on the economic changes

The repo rate is set by the Monetary Policy Committee (MPC) of the Reserve Bank of India. The MPC consists of members from the RBI and external experts, and their decisions are aimed at achieving the central bank's policy objectives.

The repo rate has a direct impact on inflation. By increasing the repo rate, the RBI can make borrowing more expensive, reducing spending and investment, which helps control inflation. Conversely, lowering the repo rate can stimulate spending and investment, potentially leading to higher inflation.

Businesses are driven by investment decisions and here the repo rate affects them by iinfluencing the borrowing costs. Higher the repo rates, higher the loan interest rates. Thus, making borrowing more expensive for businesses, which can reduce investment and expansion plans. Lower repo rates make borrowing cheaper, encouraging businesses to invest and grow.

When you put together several economic indicators, they help predict changes in the repo rate, including inflation rates, GDP growth, employment data, and global economic trends. Additionally, statements and reports from the Reserve Bank of India can provide insights into potential future changes in the repo rate.

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