{"id":15338,"date":"2026-05-29T18:00:14","date_gmt":"2026-05-29T12:30:14","guid":{"rendered":"https:\/\/lakshmishree.com\/blog\/?p=15338"},"modified":"2026-05-29T18:00:46","modified_gmt":"2026-05-29T12:30:46","slug":"what-is-repo-rate","status":"publish","type":"post","link":"https:\/\/lakshmishree.com\/blog\/what-is-repo-rate\/","title":{"rendered":"What is Repo Rate 2026: Current 5.25% Rate &amp; How It Impacts Your EMI"},"content":{"rendered":"\n<p>When the Reserve Bank of India wants to slow down inflation or push the economy to grow faster, the first tool it reaches for is the repo rate. Every MPC meeting, every rate cut or hike, all of it circles back to this one rate. And yet, most people who follow this news every two months have never really understood <strong>what is repo rate<\/strong> or what it actually does to their money.<\/p>\n\n\n\n<p>This guide explains exactly that. What the repo rate is, how it works mechanically, why RBI changes it, and what it means for your home loan, your fixed deposit, and the stocks in your portfolio.<\/p>\n\n\n\n<div style=\"height:12px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"has-background has-medium-font-size\" style=\"background:linear-gradient(135deg,rgb(202,248,128) 73%,rgb(113,206,126) 89%);font-style:normal;font-weight:500\"><a href=\"https:\/\/lakshmishree.com\/blog\/\" data-type=\"page\" data-id=\"2572\">Related reading<\/a> from this section: Reverse Repo Rate<\/p>\n\n\n\n<div style=\"height:13px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\"><h2>Table Of Contents<\/h2><nav><ul><li class=\"\"><a href=\"#what-is-repo-rate\">What Is Repo Rate?<\/a><\/li><li class=\"\"><a href=\"#how-does-the-repo-rate-work-the-mechanics\">How Does the Repo Rate Work? The Mechanics<\/a><\/li><li class=\"\"><a href=\"#why-does-the-rbi-change-the-repo-rate\">Why Does the RBI Change the Repo Rate?<\/a><\/li><li class=\"\"><a href=\"#repo-rate-and-the-interest-rate-corridor-of-rbi\">Repo Rate and the Interest Rate Corridor of RBI<\/a><\/li><li class=\"\"><a href=\"#how-the-repo-rate-affects-your-loans\">How the Repo Rate Affects Your Loans<\/a><ul><\/ul><\/li><li class=\"\"><a href=\"#how-the-repo-rate-affects-your-investments\">How the Repo Rate Affects Your Investments<\/a><\/li><li class=\"\"><a href=\"#repo-rate-history-the-key-movements\">Repo Rate History: The Key Movements<\/a><\/li><li class=\"\"><a href=\"#repo-rate-vs-reverse-repo-rate-the-key-difference\">Repo Rate vs Reverse Repo Rate: The Key Difference<\/a><\/li><li class=\"\"><a href=\"#for-exams-quick-reference\">For Exams: Quick Reference<\/a><ul><\/ul><\/li><li class=\"\"><a href=\"#what-this-means-for-you-as-an-investor\">Conclusion<\/a><\/li><li class=\"\"><a href=\"#frequently-asked-questions\">Frequently Asked Questions<\/a><ul><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is-repo-rate\"><strong>What Is Repo Rate?<\/strong><\/h2>\n\n\n\n<p>Repo rate is short for <strong>Repurchasing Option Rate<\/strong>.&nbsp;<\/p>\n\n\n\n<p>It is the <a href=\"https:\/\/lakshmishree.com\/blog\/non-convertible-debentures\/\">interest rate<\/a> at which the Reserve Bank of India lends short-term money to commercial banks. When a bank like SBI or HDFC needs funds urgently, it can borrow from the RBI by temporarily selling government securities to the central bank, with a promise to buy them back at a slightly higher price. The difference in that price, expressed as a percentage, is the repo rate.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/cleartax.in\/s\/repo-rate\" target=\"_blank\" rel=\"noopener\">Current repo rate (as of May 2026): 5.25%<\/a><\/strong><\/p>\n\n\n\n<p>Think of it this way: just as you pay interest when you borrow from a bank, banks pay interest when they borrow from the RBI. The repo rate is that interest.<\/p>\n\n\n\n<p>The RBI reduced the repo rate by 25 basis points in December 2025, bringing it down to its current level. This followed a cumulative 125 basis points of cuts across FY2025-26. It is the most aggressive easing cycle since 2019.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-does-the-repo-rate-work-the-mechanics\"><strong>How Does the Repo Rate Work? The Mechanics<\/strong><\/h2>\n\n\n\n<p>Here is what actually happens during a repo rate transaction:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>A commercial bank has a short-term liquidity need; say it needs funds overnight or for a few days.<\/li>\n\n\n\n<li>The bank approaches the RBI under the <strong>Liquidity Adjustment Facility (LAF)<\/strong> and offers government securities as collateral.<\/li>\n\n\n\n<li>The RBI lends money at the repo rate (which currently sits at 5.25%).<\/li>\n\n\n\n<li>The bank repurchases those securities back after the agreed period at a slightly higher price, which effectively means it has paid interest at the repo rate.<\/li>\n<\/ol>\n\n\n\n<p>The entire process is designed to ensure banks never run out of liquidity while also giving the RBI a lever to control how much money flows through the system.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"why-does-the-rbi-change-the-repo-rate\"><strong>Why Does the RBI Change the Repo Rate?<\/strong><\/h2>\n\n\n\n<p><strong>The Monetary Policy Committee (MPC)<\/strong> of the RBI, a six-member body chaired by the RBI Governor, meets every two months to <a href=\"https:\/\/www.rbi.org.in\/scripts\/FS_Overview.aspx?fn=2752\" target=\"_blank\" rel=\"noopener\">review and set the repo rate<\/a>. The key factors they weigh before finalising:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Inflation:<\/strong> The RBI has a mandated inflation target of 4%, with a tolerance band of \u00b12%. When inflation runs hot, RBI raises the repo rate to make borrowing expensive, which reduces spending and cools prices. When inflation is under control, it has room to cut.<\/li>\n\n\n\n<li><strong>GDP growth:<\/strong> If the economy is slowing down, the RBI may cut the repo rate to encourage banks to lend more, which stimulates investment and consumption.<\/li>\n\n\n\n<li><strong>Global interest rates:<\/strong> When the US Federal Reserve raises rates, capital tends to flow out of emerging markets like India. The RBI monitors this closely and may adjust the repo rate to prevent excessive rupee depreciation.<\/li>\n\n\n\n<li><strong>Rupee stability and forex reserves:<\/strong> A sharp depreciation in the rupee can import inflation, particularly in oil. The repo rate decision also accounts for currency conditions.<\/li>\n<\/ul>\n\n\n\n<p>The decision on <strong>what is repo rate and what it should be<\/strong> is never based on just one factor. The MPC weighs all of these simultaneously. This is also the reason why rate decisions are sometimes surprising and always closely watched.<\/p>\n\n\n\n<div style=\"height:19px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"width: 100%; max-width: 100%; margin: 60px 0; clear: both; box-sizing: border-box; perspective: 1000px;\">\n    \n    <style>\n        \/* Modern Typography & Container *\/\n        .ls-framer-card {\n            position: relative;\n            background: #ffffff;\n            border: 1px solid rgba(0,0,0,0.05);\n            border-radius: 16px;\n            padding: 50px 30px;\n            text-align: center;\n            overflow: hidden;\n            font-family: 'Inter', -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, sans-serif;\n            \/* Layered Shadow - Framer Style *\/\n            box-shadow: \n                0 0 0 1px rgba(0,0,0,0.01),\n                0 10px 20px -5px rgba(0,0,0,0.05),\n                0 20px 40px -10px rgba(0,0,0,0.03);\n            transition: all 0.5s cubic-bezier(0.4, 0, 0.2, 1);\n        }\n\n        \/* Subtle Animated Background - 21st.dev Style *\/\n        .ls-framer-card::before {\n            content: \"\";\n            position: absolute;\n            top: -50%;\n            left: -50%;\n            width: 200%;\n            height: 200%;\n            background: radial-gradient(circle at center, rgba(230, 126, 34, 0.03) 0%, transparent 50%);\n            animation: ls-rotate 15s linear infinite;\n            z-index: 0;\n        }\n\n        @keyframes ls-rotate {\n            from { transform: rotate(0deg); }\n            to { transform: rotate(360deg); }\n        }\n\n        .ls-content-wrap {\n            position: relative;\n            z-index: 1;\n        }\n\n        .ls-framer-card h3 {\n            margin: 0 0 12px 0;\n            color: #0F172A;\n            font-size: 24px;\n            font-weight: 800;\n            letter-spacing: -0.03em;\n        }\n\n        .ls-framer-card p {\n            margin: 0 0 35px 0;\n            color: #64748B;\n            font-size: 16px;\n            max-width: 500px;\n            margin-left: auto;\n            margin-right: auto;\n            line-height: 1.6;\n        }\n\n        \/* Button Container *\/\n        .ls-btn-group {\n            display: flex;\n            flex-wrap: wrap;\n            justify-content: center;\n            gap: 16px;\n        }\n\n        \/* Base Button Style *\/\n        .ls-framer-btn {\n            display: inline-flex;\n            align-items: center;\n            justify-content: center;\n            padding: 14px 32px;\n            font-size: 14px;\n            font-weight: 600;\n            text-decoration: none;\n            border-radius: 10px;\n            transition: all 0.4s cubic-bezier(0.175, 0.885, 0.32, 1.275); \/* Bouncy Framer Spring *\/\n            cursor: pointer;\n            letter-spacing: -0.01em;\n        }\n\n        \/* Explore Research - Ghost Style *\/\n        .btn-ghost {\n            background: transparent;\n            color: #334155 !important;\n            border: 1px solid #E2E8F0;\n        }\n\n        .btn-ghost:hover {\n            background: #F8FAFC;\n            border-color: #CBD5E1;\n            transform: translateY(-2px);\n        }\n\n        \/* Start Investing - Primary Solid Style *\/\n        .btn-primary {\n            background: #E67E22;\n            color: #ffffff !important;\n            border: 1px solid #E67E22;\n            box-shadow: 0 4px 12px rgba(230, 126, 34, 0.2);\n        }\n\n        .btn-primary:hover {\n            background: #D35400;\n            border-color: #D35400;\n            transform: translateY(-3px) scale(1.02);\n            box-shadow: 0 8px 20px rgba(230, 126, 34, 0.3);\n        }\n\n        .btn-primary:active {\n            transform: translateY(0) scale(0.98);\n        }\n\n        \/* Orange Accent Line *\/\n        .ls-accent {\n            position: absolute;\n            top: 0;\n            left: 50%;\n            transform: translateX(-50%);\n            width: 80px;\n            height: 4px;\n            background: #E67E22;\n            border-radius: 0 0 4px 4px;\n        }\n    <\/style>\n\n    <div class=\"ls-framer-card\">\n        <div class=\"ls-accent\"><\/div>\n        \n        <div class=\"ls-content-wrap\">\n            <h3>Optimize Your Strategy<\/h3>\n            <p>Join thousands of investors using Lakshmishree\u2019s research to navigate the Indian markets with precision.<\/p>\n\n            <div class=\"ls-btn-group\">\n                <a href=\"https:\/\/lakshmishree.com\/blog\/\" class=\"ls-framer-btn btn-ghost\">\n                    Explore Research\n                <\/a>\n                <a href=\"https:\/\/ekyc.lakshmishree.com:9080\/\" class=\"ls-framer-btn btn-primary\">\n                    Start Investing\n                <\/a>\n            <\/div>\n        <\/div>\n    <\/div>\n<\/div>\n\n\n\n<div style=\"height:19px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"repo-rate-and-the-interest-rate-corridor-of-rbi\"><strong>Repo Rate and the Interest Rate Corridor of RBI<\/strong><\/h2>\n\n\n\n<p>Understanding <strong>what is repo rate<\/strong> means recognizes that it does not operate in isolation. It sits at the centre of what the RBI calls the interest rate corridor, which is a band bounded by two other rates:&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Rate<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>Current Level<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>What It Means<\/strong><\/td><\/tr><tr><td>MSF Rate (ceiling)<\/td><td class=\"has-text-align-center\" data-align=\"center\">5.50%<\/td><td class=\"has-text-align-center\" data-align=\"center\">The rate at which banks can borrow in emergencies, pledging SLR securities<\/td><\/tr><tr><td><strong>Repo Rate (centre)<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>5.25%<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\">The benchmark overnight lending rate<\/td><\/tr><tr><td>SDF Rate (floor)<\/td><td class=\"has-text-align-center\" data-align=\"center\">5.00%<\/td><td class=\"has-text-align-center\" data-align=\"center\">The rate at which RBI absorbs excess liquidity from banks without collateral<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>The SDF (Standing Deposit Facility) replaced the old reverse repo rate as the effective floor of this corridor in April 2022. This is worth understanding because most financial content still quotes the old reverse repo rate of 3.35%, which technically exists on the books but is no longer the operative rate. For a full explanation of the reverse repo rate and the SDF transition, see our [Reverse Repo Rate guide: SOON].<\/p>\n\n\n\n<p>The 50-basis-point corridor&nbsp; SDF 25 bps below repo, MSF 25 bps above is how the RBI keeps short-term market rates anchored around the policy rate.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-the-repo-rate-affects-your-loans\"><strong>How the Repo Rate Affects Your Loans<\/strong><\/h2>\n\n\n\n<p>This is where the repo rate moves from abstract monetary policy and starts impacting your monthly bank statements.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"home-loans\"><strong>Home loans:<\/strong><\/h3>\n\n\n\n<p>Most home loans today are linked to the bank's Repo-Linked Lending Rate (RLLR), which moves in near-lockstep with the repo rate. When the RBI cuts the repo rate by 25 bps, your bank is required to pass on the change to floating-rate home loan borrowers. A 25 bps cut on a Rs 50 lakh loan with a 20-year tenure reduces EMI by approximately Rs 800\u20131,000 per month, or saves around Rs 2\u20133 lakh over the loan life.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"personal-and-car-loans\"><strong>Personal and car loans:<\/strong><\/h3>\n\n\n\n<p>These are also increasingly linked to external benchmarks. While the pass-through is not always immediate for non-home loans, a sustained rate-cutting cycle does bring consumer loan rates down over months.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"business-and-msme-credit\"><strong>Business and MSME credit:<\/strong><\/h3>\n\n\n\n<p>A lower repo rate reduces the cost of <a href=\"https:\/\/lakshmishree.com\/blog\/types-of-working-capital\/\">working capital<\/a> loans and term credit for businesses. This is why rate cuts are considered growth-supportive as they make it cheaper for businesses to borrow and expand.<\/p>\n\n\n\n<p>The transmission is not always perfect or immediate. Banks sometimes delay passing on cuts, especially when they have older, fixed-rate liabilities. But over a full rate cycle, the repo rate is the most direct driver of the cost of credit in the economy.<\/p>\n\n\n\n<div style=\"height:17px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-media-text is-stacked-on-mobile has-background\" style=\"background:linear-gradient(135deg,rgb(202,248,128) 83%,rgb(113,206,126) 88%);grid-template-columns:28% auto\"><figure class=\"wp-block-media-text__media\"><a href=\"https:\/\/lakshmishree.com\/blog\/government-banks-in-india\/\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026-1024x683.jpg\" alt=\"Government Banks In India\" class=\"wp-image-13527 size-full\" srcset=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026-1024x683.jpg 1024w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026-632x421.jpg 632w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026-768x512.jpg 768w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026-150x100.jpg 150w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/TOP-GOVERNMENT-BANKS-IN-2026.jpg 1536w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"wp-block-media-text__content\">\n<p class=\"has-medium-font-size\"><a href=\"https:\/\/lakshmishree.com\/blog\/\" data-type=\"page\" data-id=\"2572\">Related Reading<\/a> from this section: <a href=\"https:\/\/lakshmishree.com\/blog\/government-banks-in-india\/\">Top Government Banks India<\/a><\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:22px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-the-repo-rate-affects-your-investments\"><strong>How the Repo Rate Affects Your Investments<\/strong><\/h2>\n\n\n\n<p>The RBI's repo rate acts as the master lever of the economy, triggering a chain reaction that directly shifts the balance of returns across your entire <a href=\"https:\/\/lakshmishree.com\/blog\/common-investing-mistakes\/\">investment portfolio<\/a>.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"has-medium-font-size\"><strong>Fixed deposits:<\/strong> When the repo rate falls, banks have less incentive to offer high FD rates since they can borrow cheaply from the RBI. FD rates typically decline within one or two quarters of a repo rate cut. If you are planning to lock money in an FD, a rate-cutting environment is the wrong time to wait, rates will likely be lower a few months from now.<br><\/li>\n\n\n\n<li class=\"has-medium-font-size\"><strong>Debt <\/strong><a href=\"https:\/\/lakshmishree.com\/blog\/tax-on-mutual-fund\/\">mutual funds: Bond prices and interest rates<\/a> move inversely. When the repo rate falls, bond prices rise, benefiting long-duration debt funds. This is why debt fund managers position aggressively for rate cuts in their portfolios.<br><\/li>\n\n\n\n<li class=\"has-medium-font-size\"><strong>Equity markets:<\/strong> Lower repo rates generally benefit equities through two channels: cheaper borrowing reduces costs for companies, and lower fixed-income returns push investors toward equities. The rate-cutting cycle that ran through FY25-26 was one of the tailwinds for the <a href=\"https:\/\/lakshmishree.com\/blog\/thursday-stock-market-outlook-17th-june-2021\/\">Indian equity market<\/a> during that period.<br><\/li>\n\n\n\n<li class=\"has-medium-font-size\"><strong>Savings accounts:<\/strong> Banks tend to offer lower <a href=\"https:\/\/lakshmishree.com\/blog\/ltcg-tax-rate\/\">savings rates<\/a> in a low-repo-rate environment. Parking large amounts in <a href=\"https:\/\/lakshmishree.com\/blog\/best-banks-in-india\/\">savings accounts when rates are falling means your real return<\/a> (after inflation) is eroding.<\/li>\n<\/ul>\n\n\n\n<div style=\"height:17px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-media-text is-stacked-on-mobile has-background\" style=\"background:linear-gradient(135deg,rgb(202,248,128) 78%,rgb(113,206,126) 92%);grid-template-columns:27% auto\"><figure class=\"wp-block-media-text__media\"><a href=\"https:\/\/lakshmishree.com\/blog\/best-swp-mutual-funds\/\"><img decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/05\/swp-image-for-best-swp-in-2026-plans-.jpg\" alt=\"Best SWP plans in 2026 comparison showing multiple mutual fund options lined up for investors evaluating systematic withdrawal plans for retirement income and wealth management.\" class=\"wp-image-15340 size-full\" srcset=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/05\/swp-image-for-best-swp-in-2026-plans-.jpg 1024w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/05\/swp-image-for-best-swp-in-2026-plans--631x421.jpg 631w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/05\/swp-image-for-best-swp-in-2026-plans--768x512.jpg 768w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/05\/swp-image-for-best-swp-in-2026-plans--150x100.jpg 150w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"wp-block-media-text__content\">\n<p class=\"has-medium-font-size\"><a href=\"https:\/\/lakshmishree.com\/blog\/\">Related<\/a><a href=\"https:\/\/lakshmishree.com\/blog\/\" data-type=\"page\" data-id=\"2572\"> Reading<\/a> From This Section:<a href=\"https:\/\/lakshmishree.com\/blog\/best-swp-mutual-funds\/\"> Best SWP mutual fund plan to retire with monthly income <\/a><\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:19px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"repo-rate-history-the-key-movements\"><strong>Repo Rate History: The Key Movements<\/strong><\/h2>\n\n\n\n<p>Understanding where the repo rate has come from helps contextualise where it is now.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Period<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>Repo Rate<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>Context<\/strong><\/td><\/tr><tr><td>2014\u20132019<\/td><td class=\"has-text-align-center\" data-align=\"center\">8.0% \u2192 5.15%<\/td><td class=\"has-text-align-center\" data-align=\"center\">Gradual easing under RBI Governors Rajan and Patel<\/td><\/tr><tr><td>2020 (COVID)<\/td><td class=\"has-text-align-center\" data-align=\"center\">Cut to 4.0%<\/td><td class=\"has-text-align-center\" data-align=\"center\">Emergency cuts to support the economy<\/td><\/tr><tr><td>2022\u20132023<\/td><td class=\"has-text-align-center\" data-align=\"center\">Raised to 6.5%<\/td><td class=\"has-text-align-center\" data-align=\"center\">Aggressive hiking cycle to fight post-COVID inflation<\/td><\/tr><tr><td>2024\u20132025<\/td><td class=\"has-text-align-center\" data-align=\"center\">6.5% \u2192 5.25%<\/td><td class=\"has-text-align-center\" data-align=\"center\">Easing cycle as inflation came under control<\/td><\/tr><tr><td>Current (2026)<\/td><td class=\"has-text-align-center\" data-align=\"center\">5.25%<\/td><td class=\"has-text-align-center\" data-align=\"center\">On hold, with debate on whether a hike cycle begins in FY27<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>The 2022\u20132023 hiking cycle was the sharpest since the 2010s. The RBI raised rates by 250 basis points in under 18 months to contain inflation that had surged past 7%. The subsequent easing cycle has been equally notable for its speed.<\/p>\n\n\n\n<div style=\"height:28px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-media-text is-stacked-on-mobile has-background has-medium-font-size\" style=\"background:linear-gradient(135deg,rgb(202,248,128) 64%,rgb(113,206,126) 87%);grid-template-columns:27% auto\"><figure class=\"wp-block-media-text__media\"><img decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset-1024x683.jpg\" alt=\"What is non-performing asset infographic showing asset vs NPA concept with broken coin representing loan default and bank risk\" class=\"wp-image-14934 size-full\" srcset=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset-1024x683.jpg 1024w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset-632x421.jpg 632w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset-768x512.jpg 768w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset-150x100.jpg 150w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2026\/04\/non-performing-asset.jpg 1536w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><div class=\"wp-block-media-text__content\">\n<p><a href=\"https:\/\/lakshmishree.com\/blog\/\" data-type=\"page\" data-id=\"2572\">Related Reading<\/a> From This Section: <a href=\"https:\/\/lakshmishree.com\/blog\/what-is-non-performing-asset\/\" data-type=\"post\" data-id=\"14931\">What is Non Performing Assets<\/a><\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:18px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"repo-rate-vs-reverse-repo-rate-the-key-difference\"><strong>Repo Rate vs Reverse Repo Rate: The Key Difference<\/strong><\/h2>\n\n\n\n<p>While the repo rate dictates the cost of borrowing to inject funds into the economy, the reverse repo rate serves as the RBI's primary tool to absorb excess liquidity from the banking system.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Feature<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>Repo Rate<\/strong><\/td><td class=\"has-text-align-center\" data-align=\"center\"><strong>Reverse Repo Rate<\/strong><\/td><\/tr><tr><td>Direction<\/td><td class=\"has-text-align-center\" data-align=\"center\">RBI lends to banks<\/td><td class=\"has-text-align-center\" data-align=\"center\">Banks lend (deposit) to RBI<\/td><\/tr><tr><td>Current rate<\/td><td class=\"has-text-align-center\" data-align=\"center\">5.25%<\/td><td class=\"has-text-align-center\" data-align=\"center\">3.35% (officially; SDF rate of 5.00% is now operative)<\/td><\/tr><tr><td>Purpose<\/td><td class=\"has-text-align-center\" data-align=\"center\">Injects liquidity into system<\/td><td class=\"has-text-align-center\" data-align=\"center\">Absorbs excess liquidity from system<\/td><\/tr><tr><td>Collateral<\/td><td class=\"has-text-align-center\" data-align=\"center\">Banks give govt securities<\/td><td class=\"has-text-align-center\" data-align=\"center\">RBI gives govt securities (old mechanism)<\/td><\/tr><tr><td>Who benefits<\/td><td class=\"has-text-align-center\" data-align=\"center\">Banks (get cheap funds)<\/td><td class=\"has-text-align-center\" data-align=\"center\">RBI (mops up excess money)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>For the full breakdown of how these two rates interact and how the SDF has changed the picture, read our [Reverse Repo Rate guide].<\/p>\n\n\n\n<div style=\"height:18px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"for-exams-quick-reference\"><strong>For Exams: Quick Reference<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"definition\"><strong>Definition:<\/strong> <\/h3>\n\n\n\n<p>The repo rate is the interest rate at which the Reserve <a href=\"https:\/\/lakshmishree.com\/blog\/psu-banks-stocks-in-india\/\">Bank of India lends short-term funds to commercial banks against government<\/a> securities under the Liquidity Adjustment Facility (LAF).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"full-form-of-repo-repurchasing-option-or-repurchase-agreement\"><strong>Full form of Repo:<\/strong> <strong>Repurchasing Option (or Repurchase Agreement)<\/strong><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"set-by-monetary-policy-committee-mpc-meets-every-two-months\"><strong>Set by:<\/strong> <strong>Monetary Policy Committee- MPC, (meets every two months)<\/strong><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"current-rate-2026-5-25\"><strong>Current rate (2026):<\/strong> 5.25%<\/h3>\n\n\n\n<p><strong>Key relationship:<\/strong> Higher repo rate \u2192 costlier bank borrowing \u2192 higher loan rates \u2192 reduced spending \u2192 lower inflation. Lower repo rate \u2192 cheaper credit \u2192 more lending \u2192 higher economic activity.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-this-means-for-you-as-an-investor\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p>Ultimately, the Repo rate is the single most important pulse to track for any Indian investor. Whether you are paying off a home loan or building a long-term equity portfolio, every decision made by the Reserve Bank of India directly impacts your take-home wealth.&nbsp;<\/p>\n\n\n\n<p>By understanding the mechanics of the current 5.25% benchmark and its relationship with the new SDF floor, you move beyond market guesswork and into the realm of research-led investing. As the RBI continues to balance inflation control with economic growth through 2026, staying informed will ensure your financial strategy remains resilient. Master the cycle, stay disciplined with your investments, and always align your portfolio with the shifting tides of monetary policy.<\/p>\n\n\n\n<div style=\"height:16px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-media-text is-stacked-on-mobile has-background\" style=\"background:linear-gradient(135deg,rgb(202,248,128) 80%,rgb(113,206,126) 84%);grid-template-columns:34% auto\"><figure class=\"wp-block-media-text__media\"><a href=\"https:\/\/lakshmishree.com\/blog\/high-book-value-stocks-in-india\/top-high-book-value-stocks-3\/\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"559\" src=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-1024x559.jpg\" alt=\"High Book Value Stocks\" class=\"wp-image-13633 size-full\" srcset=\"https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-1024x559.jpg 1024w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-752x410.jpg 752w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-768x419.jpg 768w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-1536x838.jpg 1536w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-2048x1117.jpg 2048w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-150x82.jpg 150w, https:\/\/lakshmishree.com\/blog\/wp-content\/uploads\/2025\/09\/Top-High-book-value-stocks-1-2-scaled.jpg 2560w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"wp-block-media-text__content\">\n<p>While the RBI repo rate drives market sentiment,<a href=\"https:\/\/lakshmishree.com\/blog\/category\/equities\/high-book-value\/\" data-type=\"category\" data-id=\"777\"> high book value stocks <\/a>provide a structural margin of safety. Protect your capital during interest rate shifts by targeting companies with a solid asset floor.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:14px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div style=\"width: 100%; max-width: 100%; margin: 60px 0; clear: both; box-sizing: border-box; perspective: 1000px;\">\n    \n    <style>\n        \/* Modern Typography & Container *\/\n        .ls-framer-card {\n            position: relative;\n            background: #ffffff;\n            border: 1px solid rgba(0,0,0,0.05);\n            border-radius: 16px;\n            padding: 50px 30px;\n            text-align: center;\n            overflow: hidden;\n            font-family: 'Inter', -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, sans-serif;\n            \/* Layered Shadow - Framer Style *\/\n            box-shadow: \n                0 0 0 1px rgba(0,0,0,0.01),\n                0 10px 20px -5px rgba(0,0,0,0.05),\n                0 20px 40px -10px rgba(0,0,0,0.03);\n            transition: all 0.5s cubic-bezier(0.4, 0, 0.2, 1);\n        }\n\n        \/* Subtle Animated Background - 21st.dev Style *\/\n        .ls-framer-card::before {\n            content: \"\";\n            position: absolute;\n            top: -50%;\n            left: -50%;\n            width: 200%;\n            height: 200%;\n            background: radial-gradient(circle at center, rgba(230, 126, 34, 0.03) 0%, transparent 50%);\n            animation: ls-rotate 15s linear infinite;\n            z-index: 0;\n        }\n\n        @keyframes ls-rotate {\n            from { transform: rotate(0deg); }\n            to { transform: rotate(360deg); }\n        }\n\n        .ls-content-wrap {\n            position: relative;\n            z-index: 1;\n        }\n\n        .ls-framer-card h3 {\n            margin: 0 0 12px 0;\n            color: #0F172A;\n            font-size: 24px;\n            font-weight: 800;\n            letter-spacing: -0.03em;\n        }\n\n        .ls-framer-card p {\n            margin: 0 0 35px 0;\n            color: #64748B;\n            font-size: 16px;\n            max-width: 500px;\n            margin-left: auto;\n            margin-right: auto;\n            line-height: 1.6;\n        }\n\n        \/* Button Container *\/\n        .ls-btn-group {\n            display: flex;\n            flex-wrap: wrap;\n            justify-content: center;\n            gap: 16px;\n        }\n\n        \/* Base Button Style *\/\n        .ls-framer-btn {\n            display: inline-flex;\n            align-items: center;\n            justify-content: center;\n            padding: 14px 32px;\n            font-size: 14px;\n            font-weight: 600;\n            text-decoration: none;\n            border-radius: 10px;\n            transition: all 0.4s cubic-bezier(0.175, 0.885, 0.32, 1.275); \/* Bouncy Framer Spring *\/\n            cursor: pointer;\n            letter-spacing: -0.01em;\n        }\n\n        \/* Explore Research - Ghost Style *\/\n        .btn-ghost {\n            background: transparent;\n            color: #334155 !important;\n            border: 1px solid #E2E8F0;\n        }\n\n        .btn-ghost:hover {\n            background: #F8FAFC;\n            border-color: #CBD5E1;\n            transform: translateY(-2px);\n        }\n\n        \/* Start Investing - Primary Solid Style *\/\n        .btn-primary {\n            background: #E67E22;\n            color: #ffffff !important;\n            border: 1px solid #E67E22;\n            box-shadow: 0 4px 12px rgba(230, 126, 34, 0.2);\n        }\n\n        .btn-primary:hover {\n            background: #D35400;\n            border-color: #D35400;\n            transform: translateY(-3px) scale(1.02);\n            box-shadow: 0 8px 20px rgba(230, 126, 34, 0.3);\n        }\n\n        .btn-primary:active {\n            transform: translateY(0) scale(0.98);\n        }\n\n        \/* Orange Accent Line *\/\n        .ls-accent {\n            position: absolute;\n            top: 0;\n            left: 50%;\n            transform: translateX(-50%);\n            width: 80px;\n            height: 4px;\n            background: #E67E22;\n            border-radius: 0 0 4px 4px;\n        }\n    <\/style>\n\n    <div class=\"ls-framer-card\">\n        <div class=\"ls-accent\"><\/div>\n        \n        <div class=\"ls-content-wrap\">\n            <h3>Optimize Your Strategy<\/h3>\n            <p>Join thousands of investors using Lakshmishree\u2019s research to navigate the Indian markets with precision.<\/p>\n\n            <div class=\"ls-btn-group\">\n                <a href=\"https:\/\/lakshmishree.com\/blog\/\" class=\"ls-framer-btn btn-ghost\">\n                    Explore Research\n                <\/a>\n                <a href=\"https:\/\/ekyc.lakshmishree.com:9080\/\" class=\"ls-framer-btn btn-primary\">\n                    Start Investing\n                <\/a>\n            <\/div>\n        <\/div>\n    <\/div>\n<\/div>\n\n\n\n<div style=\"height:22px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"frequently-asked-questions\"><strong>Frequently Asked Questions<\/strong><\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1780044422864\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>What is repo rate as of today in India?<\/strong><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The current repo rate is 5.25%, as set by the RBI MPC in December 2025 and maintained through the April 2026 meeting.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044446827\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>Who decides the repo rate in India?<\/strong><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The Monetary Policy Committee (MPC), comprising three RBI members including the Governor and three external members appointed by the government. Decisions require a majority vote.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044466947\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>How often does the repo rate change?<\/strong><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The MPC meets every two months. Rate changes can happen at any meeting, though the RBI sometimes chooses to hold rates even if market expectations point toward a cut or hike.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044480658\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>What happens when the repo rate is increased?<\/strong><\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Banks pay more to borrow from the RBI. They pass this on by raising lending rates. Credit becomes more expensive, consumption and investment slow, and inflation tends to fall over the following months.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044492826\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>What is repo rate vs reverse repo rate?<\/strong>\u00a0<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>While <strong>what is repo rate<\/strong> defines the interest banks pay to <em>borrow<\/em> from the RBI, the reverse repo rate is the interest the RBI pays banks to <em>deposit<\/em> their excess funds. The former injects cash into the economy; the latter absorbs it.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044509442\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>How long does a repo rate change take to affect my EMI?<\/strong>\u00a0<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>If your home loan is linked to the repo rate (RLLR), your EMI will not change instantly. Banks adjust it on your next scheduled loan reset date, which typically happens every 3 to 6 months (quarterly or semi-annually).<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044522880\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>How does changing the repo rate control inflation?<\/strong>\u00a0<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The core function of <strong>what is repo rate<\/strong> is to manage prices. By raising the rate, the RBI makes borrowing expensive. This reduces consumer spending and business borrowing, which cools down market demand and lowers inflation.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044535706\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>Should I book a Fixed Deposit (FD) when the repo rate falls?<\/strong>\u00a0<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Yes, book your FD immediately. Banks lower their FD interest rates shortly after an RBI rate cut. Waiting means you will likely lock in a lower guaranteed return.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1780044550867\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"><strong>Why do banks pay the repo rate?<\/strong> <\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Banks pay it to borrow emergency or short-term cash from the RBI to maintain daily operational liquidity. They pledge government securities as collateral, and the repo rate is simply the interest they pay for that loan.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><\/h2>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When the Reserve Bank of India wants to slow down inflation or push the economy to grow faster, the first tool it reaches for is the repo rate. Every MPC meeting, every rate cut or hike, all of it circles back to this one rate. And yet, most people who follow this news every two [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":15346,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[269,301],"tags":[],"class_list":["post-15338","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-basics","category-investment-learnings"],"_links":{"self":[{"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/posts\/15338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/comments?post=15338"}],"version-history":[{"count":5,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/posts\/15338\/revisions"}],"predecessor-version":[{"id":15349,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/posts\/15338\/revisions\/15349"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/media\/15346"}],"wp:attachment":[{"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/media?parent=15338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/categories?post=15338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lakshmishree.com\/blog\/wp-json\/wp\/v2\/tags?post=15338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}