Repo Rate

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Definition

The repo rate (Repurchase Rate) is the RBI’s primary monetary policy tool. When the RBI lends money to banks overnight against government securities, it charges the repo rate. Changes directly affect lending rates across the economy.

Since Oct 2019, all new floating-rate retail loans from banks must link to an external benchmark, with repo being the most common. The RBI’s Monetary Policy Committee reviews rates six times annually. Rate transmission (from RBI to borrowers) occurs within 1-3 months. Tracking repo rate trends helps borrowers time loan decisions.

Frequently Asked Questions

How does repo rate affect my EMI? ▾
If your loan is EBLR-linked, a 0.25% repo rate hike increases your rate by 0.25%, raising EMI or extending tenure. Cuts have the opposite effect.
How often does RBI change the repo rate? ▾
The MPC meets six times a year. Rate changes happen based on inflation, growth, and economic outlook. Not every meeting results in a change.
Can my rate change between RBI meetings? ▾
No — repo rate only changes when the MPC announces it. Your rate resets on your lender's scheduled reset dates (at least quarterly) after an RBI change.
Why It Matters

The repo rate directly drives most floating-rate loan costs in India. Following RBI policy decisions helps borrowers anticipate EMI changes and time applications strategically.

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