Statutory Liquidity Ratio (SLR)<\/td> 18.00%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nThese rates together form the framework the RBI uses to control money supply and inflation in the economy.<\/p>\n\n\n\n
<\/span>What Is the Repo Rate?<\/span><\/h2>\n\n\n\nThe word “repo”<\/strong> stands for “Repurchase Agreement”<\/strong> or “Repurchasing Option.” The repo rate is the rate of interest that banks pay when they borrow short-term funds from the RBI.<\/p>\n\n\n\nWhen a bank runs short of money for a short period, it borrows from the RBI by selling government securities to the RBI, with a promise to buy them back later at a fixed price. The extra amount the bank pays to buy them back is the interest, and that interest rate is the repo rate. This borrowing is usually for a very short time, often just overnight.<\/p>\n\n\n\n
Because the repo rate is the cost of money for banks, it directly affects the interest rates banks charge you on loans. So when you hear “RBI cut the repo rate,” it usually means loans may become cheaper soon.<\/p>\n\n\n\n
<\/span>What Is the Reverse Repo Rate?<\/span><\/h2>\n\n\n\nThe reverse repo rate<\/strong> is the opposite of the repo rate. It is the interest rate at which banks park their extra money with the RBI<\/strong> and earn interest on it.<\/p>\n\n\n\nIf banks have more money than they currently need, they can deposit it with the RBI and earn interest through the reverse repo rate. This allows the RBI to reduce excess liquidity in the economy and help keep inflation under control.<\/p>\n\n\n\n
As of 2026, the reverse repo rate is 3.35%.<\/strong> The RBI now mostly uses the Standing Deposit Facility (SDF)<\/strong> instead of the old reverse repo to absorb extra money from banks. So while the reverse repo rate still officially exists, the SDF has become the main tool<\/strong> for this job since April 2022.<\/p>\n\n\n\n<\/span>What Is the Standing Deposit Facility (SDF)?<\/span><\/h2>\n\n\n\nThe Standing Deposit Facility (SDF)<\/strong> is a tool the RBI introduced in April 2022<\/strong> to absorb extra cash from banks without giving them any government securities in return.<\/strong> This makes it simpler and more flexible than the old reverse repo.<\/p>\n\n\n\nKey points about the SDF:<\/p>\n\n\n\n
\nBanks can park their surplus money with the RBI under the SDF and earn the SDF rate (currently 5.00%).<\/strong><\/li>\n\n\n\nIt does not require any collateral (securities)<\/strong> to be exchanged.<\/li>\n\n\n\nIt now acts as the main way the RBI removes excess liquidity<\/strong> from the system.<\/li>\n\n\n\nThe SDF rate forms the floor of the policy corridor<\/strong> the lowest level around which short-term rates move.<\/li>\n<\/ul>\n\n\n\nThe SDF is the RBI’s modern, easy tool to mop up extra money<\/strong> from banks and keep liquidity under control.<\/p>\n\n\n\n<\/span>Repo, SDF, MSF and Bank Rate: The Policy Corridor Explained<\/span><\/h2>\n\n\n\nThe RBI uses several rates that work together like a corridor<\/strong> (a band) around the repo rate. Understanding this helps you see the full picture:<\/p>\n\n\n\n\nRepo Rate (5.25%):<\/strong> The middle of the corridor \u2014 the main rate at which RBI lends to banks.<\/li>\n\n\n\nSDF (5.00%):<\/strong> The floor<\/strong> of the corridor \u2014 where banks park extra money safely.<\/li>\n\n\n\nMSF (5.50%):<\/strong> The ceiling<\/strong> of the corridor \u2014 an emergency window where banks borrow extra money beyond their normal limit, at a slightly higher rate.<\/li>\n\n\n\nBank Rate (5.50%):<\/strong> A longer-term lending rate by the RBI, usually moving with the MSF.<\/li>\n<\/ul>\n\n\n\nSo the corridor in 2026 runs from a floor of 5.00% (SDF)<\/strong> to a ceiling of 5.50% (MSF)<\/strong>, with the repo rate of 5.25% in the middle.<\/strong> This narrow corridor keeps short-term interest rates stable and predictable.<\/p>\n\n\n\n<\/span>How the Repo Rate Affects Your Loan EMI<\/span><\/h2>\n\n\n\nThe repo rate can directly affect your loan EMIs, especially if your loan has a floating interest rate. Since the RBI made it a rule, most new floating-rate retail loans<\/strong> (home loans, car loans, personal loans for individuals and MSMEs) are linked to an External Benchmark Lending Rate (EBLR)<\/strong>, which is usually the repo rate.<\/strong> This means:<\/p>\n\n\n\n\nWhen the RBI cuts<\/strong> the repo rate, your loan interest rate falls<\/strong>, and your EMI goes down<\/strong> (or your loan tenure shortens).<\/li>\n\n\n\nWhen the RBI raises<\/strong> the repo rate, your loan interest rate rises<\/strong>, and your EMI goes up.<\/strong><\/li>\n<\/ul>\n\n\n\nEBLR-linked loans react fast<\/strong> to repo rate changes often within a couple of months. Older MCLR-linked loans<\/strong> react more slowly. So if you have a home loan, a repo rate cut is good news, because your EMI usually drops soon after.<\/p>\n\n\n\n<\/span>How the Repo Rate Affects FD and Savings Returns<\/span><\/h2>\n\n\n\nThe repo rate does not only affect loans it also affects the interest you earn<\/strong> on deposits:<\/p>\n\n\n\n\nWhen the repo rate is high<\/strong>, banks usually offer better FD (fixed deposit) interest rates<\/strong>, so savers earn more.<\/li>\n\n\n\nWhen the repo rate is low<\/strong> (or falling), FD rates tend to come down<\/strong>, so returns on new deposits reduce.<\/li>\n<\/ul>\n\n\n\nLower rates help borrowers but may reduce FD earnings. A long-term FD can help you secure a higher interest rate before rates fall further.<\/p>\n\n\n\n
<\/span>Why Does the RBI Change the Repo Rate?<\/span><\/h2>\n\n\n\nThe RBI changes the repo rate mainly to control inflation and support economic growth.<\/strong> It is a balancing act:<\/p>\n\n\n\n\nTo fight high inflation:<\/strong> The RBI raises<\/strong> the repo rate. Loans become costlier, people and businesses borrow and spend less, demand cools, and prices come down.<\/li>\n\n\n\nTo boost a slow economy:<\/strong> The RBI cuts<\/strong> the repo rate. Loans become cheaper, people borrow and spend more, businesses invest, and growth picks up.<\/li>\n<\/ul>\n\n\n\nThe RBI tries to balance two goals: keeping inflation under control and supporting economic growth. Its official inflation target is 4%, with an acceptable range of 2% to 6%. Since inflation has remained relatively low and growth has been strong, the RBI reduced interest rates during 2025 and is now holding the repo rate at 5.25% while monitoring future developments.<\/p>\n\n\n\n
<\/span>RBI Repo Rate History (2024\u20132026)<\/span><\/h2>\n\n\n\nThe RBI ran one of its most active easing cycles in 2025:<\/p>\n\n\n\nDate<\/strong><\/td>Repo Rate<\/strong><\/td>Change<\/strong><\/td><\/tr>2024 (most of the year)<\/td> 6.50%<\/td> Unchanged (long pause)<\/td><\/tr> February 2025<\/td> 6.25%<\/td> Cut by 0.25%<\/td><\/tr> April 2025<\/td> 6.00%<\/td> Cut by 0.25%<\/td><\/tr> June 2025<\/td> 5.50%<\/td> Cut by 0.50%<\/td><\/tr> December 2025<\/td> 5.25%<\/td> Cut by 0.25%<\/td><\/tr> February 2026<\/td> 5.25%<\/td> Unchanged<\/td><\/tr> April 2026<\/td> 5.25%<\/td> Unchanged<\/td><\/tr> June 2026<\/td> 5.25%<\/td> Unchanged<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nDuring 2025, the RBI reduced the repo rate by a total of 125 basis points (1.25%), lowering it from 6.50% to 5.25%. Since December 2025, the rate has remained unchanged, reflecting the central bank follows a data-driven policy approach.<\/p>\n\n\n\n
<\/span>What Is RBI Monetary Policy?<\/span><\/h2>\n\n\n\nThe RBI uses monetary policy to control inflation, manage the flow of money, and support economic growth. The repo rate is its main policy tool and plays a major role in determining interest rates in the economy.<\/p>\n\n\n\n
The repo rate is set by the six-member MPC. The committee meets every two months to review the economy and decide whether interest rates should be changed.<\/p>\n\n\n\n
There are two broad types of monetary policy:<\/p>\n\n\n\n
\nExpansionary (easy) policy:<\/strong> Lower rates to boost growth and spending.<\/li>\n\n\n\nContractionary (tight) policy:<\/strong> Higher rates to control inflation.<\/li>\n<\/ul>\n\n\n\nWhen you hear the RBI announce a “stance”<\/strong> along with the rate \u2014 like neutral, accommodative, or withdrawal of accommodation<\/strong> \u2014 that stance is a signal<\/strong> about where rates may go next.<\/p>\n\n\n\n<\/span>What Is the Monetary Policy “Stance”?<\/span><\/h2>\n\n\n\nAlong with the rate, the RBI announces a stance<\/strong>, which hints at its future direction. The common stances are:<\/p>\n\n\n\n\nAccommodative:<\/strong> The RBI is open to cutting rates<\/strong> to support growth.<\/li>\n\n\n\nNeutral:<\/strong> The RBI can move either way<\/strong> \u2014 cut or hike \u2014 depending on data. (This is the current 2026 stance.<\/strong>)<\/li>\n\n\n\nWithdrawal of accommodation \/ Tightening:<\/strong> The RBI is leaning towards higher rates<\/strong> to control inflation.<\/li>\n<\/ul>\n\n\n\nIn 2026, The RBI is currently taking a neutral approach. It will decide future interest rate changes based on economic data and inflation trends.<\/p>\n\n\n\n
<\/span>CRR and SLR: Two More Important RBI Tools<\/span><\/h2>\n\n\n\nApart from the repo rate, the RBI uses two more tools to manage how much money banks can lend:<\/p>\n\n\n\n
\nCash Reserve Ratio (CRR) \u2014 3.00%:<\/strong> The share of a bank’s deposits it must keep with the RBI as cash. A lower CRR<\/strong> leaves banks with more money to lend.<\/strong> In 2025, the RBI cut CRR from 4% to 3%, releasing a large amount of money into the system.<\/li>\n\n\n\nStatutory Liquidity Ratio (SLR) \u2014 18.00%:<\/strong> The share of deposits a bank must keep in safe assets like government securities, gold, or cash before lending.<\/li>\n<\/ul>\n\n\n\nThese two ratios work alongside the repo rate. By adjusting CRR and SLR, the RBI can inject or drain liquidity<\/strong> without even touching the repo rate.<\/p>\n\n\n\n<\/span>Repo Rate vs Reverse Repo Rate<\/span><\/h2>\n\n\n\nThese two are often confused, so here is a simple side-by-side:<\/p>\n\n\n\nPoint<\/strong><\/td>Repo Rate<\/strong><\/td>Reverse Repo Rate<\/strong><\/td><\/tr>Meaning<\/td> RBI lends to banks<\/td> Banks park money with RBI<\/td><\/tr> Direction of money<\/td> RBI \u2192 Banks<\/td> Banks \u2192 RBI<\/td><\/tr> Current value (2026)<\/td> 5.25%<\/td> 3.35%<\/td><\/tr> Purpose<\/td> Inject money \/ set lending cost<\/td> Absorb extra money<\/td><\/tr> Effect of increase<\/td> Loans costlier<\/td> Banks park more, lend less<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nrepo = RBI lending to banks<\/strong>, and reverse repo = banks lending to RBI.<\/strong> Today, the RBI mainly uses the SDF<\/strong> rather than the reverse repo to absorb money.<\/p>\n\n\n\n<\/span>RBI MPC Meeting Schedule 2026<\/span><\/h2>\n\n\n\nThe RBI’s Monetary Policy Committee meets six times in a financial year<\/strong> to review and decide the repo rate. After the June 2026 meeting (which held the rate at 5.25%), the next MPC meeting is scheduled for 3\u20135 August 2026.<\/strong><\/p>\n\n\n\nEach meeting is closely watched by home-loan borrowers, businesses, investors, and the stock and bond markets<\/strong>, because any change in the repo rate quickly affects EMIs, deposit rates, and market sentiment. Keeping an eye on these meeting dates helps you plan your loans and investments better.<\/p>\n\n\n\n