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Last updated on: July 29, 2025
The repo rate, short for ‘repurchase rate,’ is the interest rate at which a country’s central bank lends money to commercial banks, typically against government securities as collateral. Set by the Reserve Bank of India (RBI) in India, the repo rate is a crucial monetary policy tool used to control inflation and manage liquidity in the banking system. When the repo rate is increased, borrowing becomes costlier for banks, leading to less money in circulation and helping to curb inflation. Conversely, lowering the repo rate makes it cheaper for banks to borrow, boosting the flow of credit and encouraging economic growth. Changes in the repo rate directly influence loan and deposit interest rates in the broader economy, impacting consumers, businesses, and overall economic activity.
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Read BioRepo rate is the rate at which the Reserve Bank of India lends money to commercial banks against government securities. This single number has an outsized impact—affecting your home loan EMIs, car loan rates, business loan affordability and the direction of the Indian economy as we move into 2025.
In India’s monetary policy, repo rate acts as a crucial lever. When you read headlines about the RBI changing the repo rate, it is not mere jargon. Every change influences how much banks charge you for loans or give you as interest on deposits.
Repo rate is not just a technical term tossed around by economists and bankers. It touches the life of every Indian, from a first time home buyer in Bengaluru to a small business owner in Pune or a startup founder in Noida.
The Reserve Bank of India, through its Monetary Policy Committee (MPC), reviews and fixes the repo rate every two months. The committee considers inflation data, GDP growth, global economic conditions, rupee valuation and even monsoon forecasts to decide if the rate should move up or down.
A higher repo rate makes borrowing costly, leading to a slowdown in spending and investment. Lower repo rates make loans cheaper, often spurring economic activity. In 2025, as the world recovers from new global shocks and fluctuating oil prices, the repo rate is likely to see more tactical revisions.
All scheduled commercial banks and several nonbanking financial companies (NBFCs) borrow short term funds from the RBI at the repo rate. When the RBI increases the repo rate, the cost of these funds goes up for all lenders. Ultimately, this cost is passed on to customers through higher interest rates on everything from personal loans to credit cards.
Did you know? In 2024, the RBI raised repo rate once after a nine month pause, showing how closely they watch factors like consumer inflation and food prices before making any move.
Repo rate stood at 6.50 percent as of early 2025, after being held steady by RBI to keep inflation in check while supporting steady GDP growth.
Yes, if you have a floating rate loan, your EMI will increase when your lender passes on a repo rate hike. This is most evident with home loans linked to the RBI’s repo rate or to an external benchmark.
Let’s say your loan interest is at 8 percent but RBI hikes repo rate by 0.25 percent. Soon, your lender may revise your loan rate to 8.25 percent, and your monthly EMI will also increase. This holds for car, auto and personal loans if they are linked to external benchmarks.
Fixed rate loans are not directly affected until the reset date or end of fixed tenure.
Since 2019, RBI made it mandatory for banks to link new floating rate loans to an external benchmark like the repo rate. So now, changes are often transmitted within a quarter. Before this, it could take six months or more for changes to trickle down to consumers.
Some lenders move faster than others depending on their own funding needs and how much external competition they face. Using online financial marketplaces, you can quickly compare current interest rates from top banks and NBFCs after every repo rate cycle.
Expert Insight: In 2025, financial advisors recommend tracking RBI’s Monetary Policy announcements, as even a small repo rate change can change your loan outflow by thousands every year.
| Factor | High Repo Rate (above 6.5 %) | Low Repo Rate (below 6 %) |
|---|---|---|
| Loan Interest Cost | Higher | Lower |
| Loan Demand | Reduced | Boosted |
| Inflation Control | Effective | May stoke inflation |
| Investor Returns | Bank FDs offer better rates | Lower savings returns |
| Economic Growth | Slower | Faster but riskier |
When repo rate is increased:
When repo rate is reduced:
People also ask:
Q: Who directly decides the repo rate in India?
A: The Reserve Bank of India’s Monetary Policy Committee, which meets at least six times a year.
Online financial marketplaces like BankBazaar, PaisaBazaar and others make it easy to check which banks have updated their interest rates and which still offer better deals after an RBI repo rate move. This lets you make an informed choice rather than sticking to your primary bank.
| Criteria | Repo Rate | Reverse Repo Rate |
|---|---|---|
| Definition | RBI lends to banks | RBI borrows from banks |
| Impact | Adds liquidity to system | Absorbs liquidity from system |
| Current Value 2025* | 6.5 percent | 3.35 percent |
| Who benefits? | Borrowers, banks | Banks with surplus funds |
Reverse repo rate is always kept lower than the repo rate. It helps control the money supply as banks park their excess cash with RBI for a lower return.
The Monetary Policy Committee recommended maintaining the repo rate at 6.5 percent in February and April 2025, continuing the pause from late 2024. However, with global uncertainties and the possibility of imported inflation, economists expect a cautious approach where RBI may look to hike in late 2025 if inflation returns.
Repo rate typically changes between two to four times in a year, depending on macroeconomic conditions. During volatile periods, emergency reviews may also be called.
Higher repo rates are used to fight inflation in food, oil and core items by making money costlier to borrow. When growth slows or recession risk rises, the RBI can lower repo rate to kick-start economic activity.
Did you know?
Whenever headline inflation in India crosses 6 percent, the RBI signals concern and prefers a tight stance with higher repo rates.
People also ask:
Q: Is repo rate the only tool available to RBI?
A: No, the RBI can also change the cash reserve ratio CRR, statutory liquidity ratio SLR, and use open market operations.
I bought my first flat in Mumbai in 2022 on a floating rate home loan. For a year, my EMI hardly changed as the repo rate was stable. But after the RBI hiked the rate in early 2024 to control inflation, my EMI increased by about 1200 rupees per month within three months. I regularly track RBI policy dates. When I shopped for a topup loan in March 2025, I used an online comparison marketplace to check which banks were offering the lowest interest rates after factoring recent repo rate changes.
This real experience taught me the importance of not just picking a bank with a low initial offer, but also staying alert to policy changes and switching loans if needed.
Yes, global events like interest rate hikes by the US Federal Reserve, oil price shocks, geopolitical tensions or supply disruptions can all push the RBI to raise or lower the repo rate to maintain economic stability.
RBI is legally independent, but policy priorities can shift with new government budgets, deficit targets or public sentiment about high inflation. However, the MPC seeks to act mostly on economic logic.
Expert Insight:
Global investors closely track India’s repo rate policy and its transparency. Sudden or unexpected changes can cause sharp moves in the rupee and stock markets.
People also ask:
Q: Does repo rate affect credit card interest rates?
A: Indirectly, yes. When borrowing costs rise for banks, most variable rate lending products become pricier, though fixed high card rates may not change as quickly as home or business loans.
For savers, a higher repo rate often leads to better fixed deposit and recurring deposit interest rates. For debt mutual funds, it can be a double edged sword—rising rates improve future yields but cause short term losses in existing portfolios.
For equity market investors, a rising repo rate can lead to lower corporate profits and cause stock prices to consolidate or fall. Global investors also chase higher yielding currencies when repo rates rise, affecting the rupee exchange rate.
Online tools now let Indian retail investors and HNIs easily compare the best FD and loan rates across multiple providers in real time.
| Loan Benchmark | Linked To | Impact Speed | Transparency |
|---|---|---|---|
| Repo Linked (RLLR) | RBI Repo Rate | High | High |
| MCLR | Bank’s Cost of Funds | Medium | Medium |
| Base Rate | Bank Policy | Slow | Low |
| PLR | Prime Lending Rate | Slow | Low |
Most new retail loans in 2025 are repo rate linked, offering faster transmission and more transparency to borrowers.
Did you know?
Major banks now offer calculators on their websites to instantly show how your EMI will change if the repo rate is changed by 0.25 percent.
Pros:
Cons:
People also ask:
Q: Should I choose a fixed or floating rate home loan given the repo rate volatility in 2025?
A: If you expect rates to fall, floating helps. If you want certainty, fixed may be better, but compare total costs online using calculators.
Repo rate is the price banks pay to borrow funds from the RBI, impacting your loan and deposit rates. In 2025, repo rate is at 6.5 percent and any change is quickly passed on to customers of public and private sector banks. Higher repo rate means dearer loans but better deposit rates. Stay alert to policy meetings, check online for best rates before borrowing, and make financial choices that suit your risk appetite and income.
Q1. What is the repo rate as of 2025?
A: As of April 2025, repo rate stands at 6.5 percent.
Q2. Can my EMI go down if the RBI cuts repo rate?
A: Yes, if you have a floating rate loan linked to repo or EBLR, your EMI will reduce if your bank passes on the benefit.
Q3. How can I know which bank has lowest interest rate after a repo rate change?
A: Use online banking marketplaces to compare the latest rates and check the transparency of different financial institutions.
Q4. Does inflation always lead to higher repo rates?
A: Usually yes, but the RBI also considers growth and global economic factors before deciding.
Q5. Is reverse repo rate important for ordinary citizens?
A: It’s more relevant for banks parking surplus funds but does give an idea of the direction of RBI’s policy stance.
Q6. Is repo rate same as bank lending rate?
A: No. Repo rate is charged between RBI and banks. Bank lending rate is what banks charge you, often based on repo or MCLR plus a spread.
Q7. Where can I follow live repo rate updates?
A: RBI’s official website and major online financial marketplaces regularly update policy rates.
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Written by Prem Anand, a content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors.
Prem Anand is a seasoned content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors. He has a strong command of industry-specific language and compliance regulations. He specializes in writing insightful blog posts, detailed articles, and content that educates and engages the Indian audience.
The content is prepared by thoroughly researching multiple trustworthy sources such as official websites, financial portals, customer reviews, policy documents and IRDAI guidelines. The goal is to bring accurate and reader-friendly insights.
This content is created to help readers make informed decisions. It aims to simplify complex insurance and finance topics so that you can understand your options clearly and take the right steps with confidence. Every article is written keeping transparency, clarity, and trust in mind.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
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