What is Repo Rate?
Repo rate is the interest rate at which Reserve bank of India (RBI) lends money to commercial banks like SBI, BOI, PNB, HDFC, ICICI or many other public sector banks & private sector banks.
What is Reverse Repo Rate?
Reverse repo rate is the interest rate at which Reserve bank of India (RBI) borrows surplus money from commercial banks.
Is there any difference in interest rate between Repo Rate vs Reverse repo rate?
Yes, always there is difference between Repo Rate & reverse repo rate. Repo rate will always be higher than the reverse repo rate. At present, as of w.e.f 7th Oct’2026 Repo rate is ~5.50% whereas reverse repo rate is ~3.35%
What will be the Impact of Increase / decrease of Repo rate?
- If repo rate will increase which means borrowing will be costlier for commercial banks, which will finally impact on the loan which banks provide to the individuals & corporates like home loan, car loan, business loans and If repo rate will reduce that means borrowing will be cheaper for commercial banks and eventually lending rates will be cheaper.
- When repo rates increase banks also increase the Fixed deposit rates and at the same time if repo rate decreases banks reduces their FD interest rates
Why do Govt. changes repo rates?
- To Control the inflation – When Inflation is going high central bank increase the repo rate to make borrowing expensive, once borrowing will become expensive purchasing power will get reduce as a result overall demand will decline which help in control the price rise and brings inflation under control.
- To encourage spending and investments – When economic growth slow down central banks reduce the repo rate and makes borrowing cheaper which prompts consumer to take loan and buy house, car, consumer durables goods as a result overall economy growth will pick- up