EconomicsIntermediate
Repo Rate
The rate at which the RBI lends short-term money to commercial banks.
Detailed explanation
It is the RBI's main policy lever, decided by the Monetary Policy Committee. Raising the repo rate makes borrowing costlier and cools demand and inflation; cutting it does the opposite. Floating-rate retail loans in India are typically linked to it directly.
Example
A 25 basis point cut on a ₹50 lakh, 20-year floating home loan reduces the EMI by roughly ₹800 a month.
Why it matters
It flows straight through to your EMI, your deposit rates and the valuation of both bonds and equities.
Key points
- Reverse repo is the rate at which the RBI absorbs liquidity.
- Changes transmit to EMIs with a lag through the reset date.
- Rate expectations often move markets more than the decision itself.
Related tool
Home loan EMI calculatorRelated terms
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.