Repo Rate: The Key to RBI's Monetary Policy

Repo rate is the interest rate at which the RBI lends money to commercial banks for short-term funding

Commercial banks borrow from RBI by offering securities like Treasury Bills as collateral, agreeing to repurchase them at a predetermined price

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Repo rate regulates liquidity, inflation, and money supply. Higher repo rate leads to fewer borrowings, slowing down investment and controlling inflation

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RBI increases repo rate when inflation is high, currency depreciates, or there's a risk of asset bubbles. It decreases when inflation and fiscal deficit are controlled

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Reverse repo rate is the rate at which RBI borrows money from banks. It's always lower than repo rate and used to control liquidity

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As of August 2024, RBI's repo rate stands at 6.5% and reverse repo rate at 3.35%

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A change in repo rate directly impacts EMIs and interest rates on loans like Personal, Car, Business, Home Loans, etc

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Repo rate also affects interest rates on fixed deposits, mutual funds, savings accounts, and other financial instruments

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The Monetary Policy Committee headed by RBI Governor decides the repo rate based on economic conditions to achieve the central bank's objectives

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Repo rate has fluctuated between 4-8% in the last decade, with the lowest being 4% during the COVID-19 pandemic

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Repo rate is the interest rate at which the RBI lends money to commercial banks for short-term funding

What is Repo Rate?

Commercial banks borrow from RBI by offering securities like Treasury Bills as collateral, agreeing to repurchase them at a predetermined price

How Repo Rate Work ?

Repo rate regulates liquidity, inflation, and money supply. Higher repo rate leads to fewer borrowings, slowing down investment and controlling inflation

Impact of Repo Rate on Economy

RBI increases repo rate when inflation is high, currency depreciates, or there's a risk of asset bubbles. It decreases when inflation and fiscal deficit are controlled

Factors Affecting Repo Rate

Reverse repo rate is the rate at which RBI borrows money from banks. It's always lower than repo rate and used to control liquidity

Repo Rate vs Reverse Repo Rate

As of August 2024, RBI's repo rate stands at 6.5% and reverse repo rate at 3.35%

Current Repo Rate in India

A change in repo rate directly impacts EMIs and interest rates on loans like Personal, Car, Business, Home Loans, etc

Repo Rate and Loan EMI

Repo rate also affects interest rates on fixed deposits, mutual funds, savings accounts, and other financial instruments

Repo Rate and Fixed Deposit

The Monetary Policy Committee headed by RBI Governor decides the repo rate based on economic conditions to achieve the central bank's objectives

RBI's Monetary Policy and Repo Rate

Repo rate has fluctuated between 4-8% in the last decade, with the lowest being 4% during the COVID-19 pandemic

Historical Repo Rate Trend