The repo rate is an important tool used by the Reserve Bank of India (RBI) to manage the flow of money in the economy. It directly affects how much interest banks charge on loans and offer on deposits. When the RBI changes the repo rate, it can make your loan EMIs go up or down, and also influence how much you earn from savings. That’s why it’s helpful to know the current repo rate—it gives you a better understanding of how the economy works and how it might affect your finances.
What is repo rate?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks when they need short-term funds. If the repo rate goes up, loans like personal, car, or home loans become more expensive. If the rate goes down, loans become more affordable, encouraging people to borrow and spend more. It’s one of the key tools the RBI uses to manage inflation and support the economy.
How is repo rate calculated?
The RBI sets the repo rate by looking at factors like inflation, economic growth, and money supply. Its Monetary Policy Committee reviews these regularly to decide if the rate should go up or down.
You can see how the repo rate has changed over time using a repo rate graph or chart, which helps spot trends and understand the economy better.
How does the Repo Rate work?
When banks need money, they borrow it from the RBI by giving government securities as collateral. The interest they pay on this borrowed money is the repo rate. If the RBI increases the repo rate, banks have to pay more interest, so they usually raise interest rates on loans for customers too. If the repo rate is cut, banks can borrow more cheaply and pass on the benefit to customers through lower loan interest rates. This helps control inflation and ensures there’s enough money flowing in the economy.
What is the current repo rate in India?
The current repo rate in India is 5.5%, following a 50 basis points cut by the Reserve Bank of India (RBI). This rate is the interest at which the RBI provides short-term funds to commercial banks against government securities. The Current reverse repo rate has also been revised to 5.75%.
These rates are instrumental in influencing loan interest rates, managing inflation, and maintaining liquidity in the financial system. The RBI’s Monetary Policy Committee (MPC) regularly reviews them in line with evolving economic conditions and inflation targets.
Reserve Bank of India repo rate
The repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks when they need short-term funds. In return, banks give government securities as collateral.
This rate plays a key role in the country’s economy. It affects how much banks charge us for loans, helps the RBI keep inflation in check, and ensures there’s enough liquidity (cash flow) in the financial system.
As of April 2025, the current repo rate is 6.00%, after the RBI reduced it by 25 basis points to support growth and control inflation.
Repo Rate Today |
5.5% |
Reverse Repo Rate |
3.35% |
Bank Rate |
6.50% |
Marginal Standing Facility Rate |
6.25% |
Historical repo rates from 2010 to 2025
Here's a table showing the historical repo rates set by the Reserve Bank of India (RBI) from 2010 to 2025. These rates reflect the RBI's response to various economic conditions over the years and tracking the repo rate effect can reveal several insights.
Year |
Repo Rate (%) |
2025 |
5.5 |
2024 |
6.5 |
2023 |
6.25 |
2022 |
4.40 – 5.90 |
2021 |
4 |
2020 |
4 |
2019 |
5.15 – 6.25 |
2018 |
6.25 – 6.50 |
2017 |
6 |
2016 |
6.5 |
2015 |
6.75 |
2014 |
7.75 – 8.00 |
2013 |
7.25 – 8.00 |
2012 |
8.00 – 8.50 |
2011 |
6.50 – 8.50 |
2010 |
5.25 – 6.25 |
Why is the Repo Rate important?
The repo rate plays a big role in how money moves in the economy. Here’s why it matters:
1. It affects loan interest rates
If the repo rate increases, borrowing becomes costlier for banks—and for you. Loan EMIs can go up. If it drops, loans may get cheaper.
2. It helps control inflation
When inflation is high, the RBI raises the repo rate to make borrowing expensive. This slows down spending. When inflation is low, the RBI can lower the rate to boost demand.
3. It supports economic growth
Lower repo rates make loans more affordable, which helps businesses grow and encourages people to spend more—giving the economy a push.
4. It impacts investments and savings
Changes in the repo rate also affect returns on savings and investments. So staying updated helps you make better financial decisions.
How is repo rate calculated?
Repo rate calculation is based on economic factors like inflation, money supply, and GDP growth. While the Reserve Bank of India (RBI) determines the rate during its policy reviews, the standardized formula used to calculate the repo rate in financial terms is:
Repo Rate = (Repurchase Price – Original Selling Price ÷ Original Selling Price) × (360 ÷ n)
Where:
Repurchase Price = Original Selling Price + Interest
n = Number of Days to Maturity
This formula ensures transparency between RBI and commercial banks. To track historical trends, you can refer to a repo rate chart or repo rate graph available on RBI or financial news websites.
How does RBI calculate Repo Rate?
The RBI calculates the repo rate based on several economic factors to control inflation and support economic growth. Key considerations include:
Inflation trends: High inflation generally prompts the RBI to increase the repo rate, while low inflation may lead to a reduction.
Economic growth: The repo rate is adjusted to balance economic growth with inflation control, ensuring stability.
Liquidity and banking needs: The demand for loans and the money supply influence repo rate adjustments.
External economic influences: Global factors like commodity prices and international market fluctuations also impact the decision.
The RBI evaluates these factors during its regular monetary policy reviews to determine the most appropriate rate.
What is reverse repo rate?
The reverse repo rate is the interest rate at which the RBI borrows money from commercial banks, usually by offering government securities in return.
When banks have extra money lying around, they can lend it to the RBI and earn interest at this rate. This gives banks a safe option to park their surplus funds instead of giving out more loans.
By doing this, the RBI can reduce the amount of money flowing in the system, which helps keep inflation in check. In simple terms, the reverse repo rate helps the RBI manage how much cash is available in the economy and keep things stable.
What is the difference between repo rate and reverse repo rate?
Repo rates and reverse repo rates are used by central banks and other financial institutions to manage their daily liquidity. The interest rate at which commercial banks obtain funds from the Reserve Bank of India is known as the repo rate. Any government securities can be exchanged for loans from the RBI to commercial banks.
The interest rate on commercial banks' deposits with the central bank is known as the current reverse repo rate. Most banks choose this method to keep their money safe in case they have more money than they need. The reverse repo rate is, in other words, an interest rate that is paid on deposited cash.
The repo rate and reverse repo rate are fundamentally different from one another. The repo rate generates income by lending to commercial banks, while the reverse repo rate generates income on the deposits made by commercial banks.
The repo rate is used to manage inflation, while the reverse repo rate is used to control the liquidity of the economy. Central banks always maintain the reverse repo rate lower than the repo rate.
Here is a summary of repo rate vs reverse repo rate:
Aspect |
Repo Rate |
Reverse Repo Rate |
Role |
Injects liquidity into the economy |
Absorbs excess liquidity |
Who benefits? |
Banks borrowing funds from RBI |
Banks depositing surplus funds with RBI |
Impact on lending |
Directly influences loan interest rates |
Indirectly influences liquidity availability |
Monetary policy tool |
Used mainly to control inflation and stimulate growth |
Used mainly to control liquidity and stabilize money supply |
Effect on money supply |
Increases money supply when rate is low |
Decreases money supply by absorbing excess funds |
Central bank income |
RBI earns interest by lending funds |
RBI pays interest to banks on deposits |
Economic effect |
Higher repo rate slows down economy |
Higher reverse repo rate encourages banks to save more |
What is affected by a change in Repo Rate?
A change in the repo rate can impact several key areas of the economy:
Loan Costs: Higher repo rate means costlier loans and EMIs; a lower rate makes borrowing cheaper.
Inflation: Raising the rate helps control inflation; lowering it boosts spending.
Investments: Low rates push money to stocks; high rates favour fixed deposits.
Currency Strength: A higher rate attracts foreign investment, strengthening the rupee.
These factors collectively shape the economic environment, influencing everything from individual borrowing costs to national growth rates.
Impact of Repo Rate on consumers
Changes in the repo rate have a direct effect on consumers in several ways:
Loan costs: A rise in the repo rate increases the interest rates on loans like home loans, personal loans, and car loans, making borrowing costlier for consumers. Conversely, a decrease in the repo rate lowers loan costs, encouraging borrowing and investment.
Savings returns: When the repo rate increases, banks tend to offer higher interest rates on deposits, benefiting savers. Lower repo rates may reduce returns on savings.
Inflation: The repo rate influences inflation; an increase typically helps control rising prices, while a reduction can increase demand, potentially leading to inflationary pressures.
In essence, consumers' borrowing and saving patterns are significantly influenced by fluctuations in the repo rate.
What is the relationship between inflation and Repo Rate
The repo rate and inflation are closely linked.
When inflation is high, the RBI increases the repo rate. This makes loans more expensive, so people borrow and spend less. As a result, inflation comes down.
When inflation is low, the RBI lowers the repo rate. This makes loans cheaper, encouraging people to borrow and spend more—giving the economy a boost.
In short, the RBI uses the repo rate to keep inflation under control and maintain economic balance.How repo rate impacts personal loan EMI?
The impact of a change in the repo rate is usually more direct and immediate on loans that offer a floating rate of interest. Commercial banks, however, usually give out a personal loan on a fixed rate of interest. Keep this in mind, existing borrowers may not be affected by a change in the repo rate.
Generally, personal loans are a little more expensive than other types of loans. When RBI increases the repo rate NBFCs, and banks must pay more to RBI while borrowing funds. Thus, the repo rate effect, or impact of repo rate on personal loan interest rates can be significant.
As a result, financial institutions raise interest rates on loans to maintain their profit margins. Due to the rise in personal loan interest rates, borrowers will have to pay more interest on their loans.
In contrast, the cost of borrowing for the banks decreases when the RBI lowers the repo rate. A cheaper EMI for the borrower results from the capacity of banks to issue loans at lower interest rates.
With fluctuation in the repo rate, the prevailing interest rates on a personal loan may be positively or negatively impacted.
Repo rate changes do not immediately affect personal loan EMIs. After the RBI announces a change in the repo rate, it takes some time for the banks to update their interest rates. Therefore, borrowers should closely monitor the repo rate and how it affects the EMIs of personal loans. Borrowers should also keep their credit scores and payment records in good shape so they can get personal loans at better interest rates.
How repo rate impacts fixed deposits?
The repo rate influences fixed deposit interest rates. When the central bank raises the repo rate, banks may increase fixed deposit rates to attract funds, offering better returns to depositors. Conversely, a lower repo rate might lead to lower fixed deposit rates, impacting returns for investors.
How repo rate affects economy?
The repo rate impacts the economy by influencing interest rates. A higher repo rate can lead to increased borrowing costs, slowing economic activity and inflation. Conversely, a lower repo rate stimulates borrowing, promoting spending and investment. Central banks use repo rate adjustments as a tool to achieve monetary policy objectives and economic stability.
- Controlling Inflation: When prices start rising too fast, the RBI raises the repo rate. This makes loans more expensive, so people and businesses tend to borrow and spend less, which helps slow down inflation.
- Boosting Growth: On the other hand, when the economy needs a push, the RBI lowers the repo rate. Cheaper loans encourage businesses and individuals to borrow, invest, and spend more, giving the economy a much-needed boost
Liquidity management: The repo rate helps the RBI control the availability of funds in the banking system. An increased repo rate reduces liquidity, while a lower rate increases it.
Investment patterns: Lower repo rates can attract investors to equities and real estate as they seek higher returns, while higher rates can shift investments to safer, fixed-income options.
Loan repayment costs: A high repo rate makes loans costlier, affecting EMIs on home, personal, and auto loans, which can impact household budgets and consumption.
How repo rate affects stock market?
The repo rate influences the stock market by affecting borrowing costs. When the central bank raises the repo rate, it can increase interest rates, making borrowing more expensive for businesses. This may impact corporate earnings and stock valuations, potentially leading to market adjustments. Conversely, a lower repo rate may stimulate economic activity and benefit stocks.
Use the personal loan EMI calculator to swiftly calculate your monthly payments on personal loans.
Conclusion
The repo rate is an important tool the RBI uses to manage inflation, encourage investment, and support economic growth. By raising or lowering the repo rate, the RBI can either slow down or speed up economic activity as needed. Along with the reverse repo rate, it helps control the flow of money in the market, affecting loan interest rates and the overall health of the economy. Knowing how the repo rate works can help borrowers and investors make smarter choices about loans and investments.
