CURRENT REPO RATE #rbi

Current Repo Rate

Current repo rate is 6.50%

Current reverse repo rate is at 3.35%.

Repo rate refers to the rate at which commercial banks borrow money by selling their securities to the Central Bank of our country i.e. Reserve Bank of India (RBI) to maintain liquidity, in case of shortage of funds or due to some statutory measures. It is one of the main tools of RBI to keep inflation under control.

What is BPS ?

BPS stands for Basis points, also referred to as “bps” are a unit of measurement used in finance to express the rate of change in an index or other benchmark or the percentage change in the value of financial instruments.

How It Works?

This is referred to as the cost of credit. Similarly, banks also borrow money from RBI during a cash crunch on which they are required to pay interest to the Central Bank. This interest rate is called the repo rate. When you borrow money from the bank, the transaction attracts interest on the principal amount. 

Ongoing Repo Rate and its Effect

RBI keeps changing the repo rate and the reverse repo rate according to changing macroeconomic factors. Whenever RBI modifies the rates, it impacts all sectors of the economy; albeit in different ways. Some segments gain as a result of the rate hike while others may suffer losses. RBI recently hiked the repo rate by 35 basis points to 6.25% from 5.90%. The reverse repo rate remains unchanged at 3.35%.

Changes in the repo rates can directly impact big-ticket loans such as home loans. The decrease in repo rates is to aim at bringing in growth and improving economic development in the country. Consumers will borrow more from banks thus stabilizing the inflation.

A decline in the repo rate can lead to the banks bringing down their lending rate. This can prove to be beneficial for retail loan borrowers. However, to bring down the loan EMIs, the lender has to reduce its base lending rate. As per the RBI guidelines, banks/financial institutions are required to transfer the benefit of interest rate cuts to consumers as soon as possible.

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