RBI Monetary Policy 2024: What is the current repo rate?

Reserve Bank of India (RBI) Governor Shaktikanta Das announced the outcome of the three-day Monetary Policy Committee (MPC) meeting on Friday. He said that the repo rate has been kept unchanged at 6.5%. Five out of six MPC members voted in favour of the rate decision.

"The Reserve Bank decided to keep the Policy Repo Rate unchanged at 6.5%," Das said, adding, "The Standing Deposit Facility rate remains at 6.25% and the Marginal Standing Facility rate and Bank Rate remain at 6.75%".

The governor also said that the real gross domestic product (GDP growth) remains the same at 7%.

What is the repo rate?

The repo rate is the interest rate at which RBI lends money to commercial banks in exchange for government securities. The term 'repo' stands for repurchase agreement or repurchase option, and interest charged by RBI is called repo rate.

Also read: Repo rate retained at 6.5%, FY25 GDP growth forecast stays 7%, inflation seen at 4.5%

The central bank increases the repo rate during inflation to control prices and restrict borrowing. Similarly, the repo rate is decreased in a recessionary environment to improve cash flow, which in turn spurs growth.

When the repo rate is increased by the RBI, commercial banks have to pay more interest on their borrowings from the central bank. It leads to changes in home loans and EMIs.

The repo rate has remained unchanged for the seventh consecutive time since it was last revised in February 2023.

Also read: RBI MPC meeting outcome today: Repo rate, stance and GDP target – Here’s what to look out for

What is the reverse repo rate?

Reverse repo rate is the rate at which the RBI borrows funds from commercial banks. Commercial banks park surplus funds with the central bank and earn interest on them.

It is used to control cash flow. During inflation, the central bank raises the reverse repo rate, which inspires commercial banks to deposit funds in RBI and earn a return.

Also read: