Repo Rate

The Repo Rate is the interest rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities as collateral. It is the RBI's primary tool for controlling money supply and inflation in the economy. When the RBI raises the repo rate, borrowing becomes more expensive for banks, which in turn raise lending rates for businesses and consumers — cooling economic activity and reducing inflation. When the rate is cut, borrowing becomes cheaper, stimulating investment and consumption. The repo rate is decided by the Monetary Policy Committee six times a year. It is one of the most closely watched policy announcements in Indian financial markets, as changes directly influence interest rates across loans, bonds, and equity valuations.