As of the latest update in June 2025, the RBI has set the repo rate at 5.50%. This followed a reduction from 6.00% earlier in 2025 to help stimulate growth amid easing inflation. The Monetary Policy Committee (MPC) of the RBI maintained this rate at its August 2025 meeting, signaling a neutral stance amid evolving economic conditions.

Alongside the repo rate, other related rates are:

• Reverse Repo Rate: 3.35%
• Marginal Standing Facility (MSF) Rate: 5.75%
• Bank Rate: 5.75%
• Standing Deposit Facility (SDF) Rate: 5.25%

The RBI’s decision to hold the repo rate steady at 5.50% reflects a balance between controlling inflation and supporting economic growth, with inflation projected at 3.1%, well within the target 2-6% range, and GDP growth forecasted at 6.5% for FY2025-26.

The above shows how the RBI has adjusted the repo rate in response to economic conditions, inflationary pressures, and growth forecasts over recent years.

The repo rate, short for "repurchase rate," is the interest rate at which the Reserve Bank of India (RBI), the country’s central bank, lends short-term funds to commercial banks. This lending is typically backed by government securities as collateral. The term comes from the repurchase agreement, wherein commercial banks sell securities to the RBI with an agreement to repurchase them at a later date at a predetermined price, which includes interest calculated at the repo rate.

In essence, when banks face a shortage of funds or need liquidity, they borrow from the RBI at this rate. The repo rate acts as a crucial instrument for the RBI to regulate liquidity, control inflation, and steer economic growth.

When commercial banks face a liquidity shortage, they borrow money from the RBI by pledging government securities. The RBI charges interest on these loans at the repo rate. The bank promises to repurchase the securities at the original price plus the interest amount accrued at the repo rate.

Raising or lowering the repo rate influences borrowing behavior by banks:

• Raising Repo Rate: When the RBI raises the repo rate, borrowing becomes more expensive for banks. This tends to reduce the amount banks borrow, leading to a lower money supply in the economy to control inflation.
• Lowering Repo Rate: When the RBI lowers the rate, borrowing costs decrease, making more funds available to banks. This can boost lending to businesses and consumers, stimulating economic activity and growth.

Thus, the repo rate acts as a tool to manage inflation and liquidity in the banking system.

The repo rate directly impacts the country’s economy in several important ways:

• Controlling Inflation: The RBI uses repo rate adjustments to manage inflation. Higher repo rates reduce liquidity, cooling down consumer demand and inflationary pressures. Lower repo rates increase liquidity to combat recessionary conditions or stimulate growth.
• Influencing Interest Rates: The repo rate is a benchmark for all other interest rates in the economy, including those on home loans, personal loans, auto loans, and fixed deposits. When the repo rate rises, banks increase lending rates, and when it falls, interest rates tend to drop.
• Liquidity Management: By regulating the cost at which banks borrow from the RBI, the repo rate helps maintain the right balance of cash flow in the financial system.
• Financial Stability: Adjusting repo rates can curb excessive risk-taking by banks and financial institutions, contributing to overall financial stability.
• Economic Growth: Lower repo rates encourage business investments and consumer spending, fueling growth. Higher repo rates slow down overheated economic activity to prevent bubbles or excessive inflation.

• Loan EMIs: When the repo rate changes, loan interest rates, particularly for floating rate loans such as home loans and personal loans, can change accordingly. An increase in repo rate might lead to higher EMIs and vice versa.
• Savings Returns: A hike in the repo rate typically leads to higher interest rates on savings accounts and fixed deposits, benefiting savers.
• Borrowing Power: Higher repo rates increase borrowing costs and may reduce loan eligibility for individuals and companies. Conversely, lower rates improve affordability.
• Investment Decisions: Repo rate changes influence market interest rates and investment returns, impacting how individuals and businesses allocate resources.
• Business Costs: For businesses relying on bank credit, changes in the repo rate affect capital costs, potentially influencing hiring, expansion, or pricing decisions.

• Repo Rate: The rate at which the RBI lends money to commercial banks.
• Reverse Repo Rate: The rate at which the RBI borrows money from commercial banks.

The reverse repo rate helps the RBI absorb excess liquidity from the banking system, while the repo rate injects liquidity. Both form important tools for monetary policy and liquidity management in India.

The RBI’s Monetary Policy Committee (MPC) meets periodically to review economic conditions before deciding repo rate changes. They consider several factors such as:

• Current and projected inflation rates
• Gross Domestic Product (GDP) growth rate and economic outlook
• Money supply and liquidity conditions
• Currency stability and foreign exchange reserves
• Employment levels and fiscal policy stance
• Global economic conditions and risks

This ensures the repo rate is optimally set to balance inflation control with growth promotion for India’s economy.