Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks, with the banks providing securities as a guarantee. It is a key tool for controlling inflation and managing the economy’s liquidity. When the repo rate is high, borrowing becomes more expensive, helping to reduce inflation. When the rate is low, borrowing is cheaper, which can stimulate economic activity. Changes in the repo rate influence other interest rates in the economy, affecting the cost of loans for consumers and businesses.