{"id":11652,"date":"2024-10-27T07:30:57","date_gmt":"2024-10-27T02:00:57","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=11652"},"modified":"2024-10-28T13:44:26","modified_gmt":"2024-10-28T08:14:26","slug":"repo-rate","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/","title":{"rendered":"Repo Rate"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d7b936263ad\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d7b936263ad\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Latest_Repo_Rate_Updates_2024\" >Latest Repo Rate Updates 2024<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#What_is_Repo_Rate\" >What is Repo Rate?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Current_Repo_Rate_in_India\" >Current Repo Rate in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Historical_Repo_Rates_in_India\" >Historical Repo Rates in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#How_Does_Repo_Rate_Work\" >How Does Repo Rate Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Calculation_of_Repo_Rate\" >Calculation of Repo Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#How_Does_Repo_Rate_Affect_Inflation\" >How Does Repo Rate Affect Inflation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Repo_Rate_vs_Reverse_Repo_Rate\" >Repo Rate vs Reverse Repo Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Repo_Rate_vs_MCLR_Rate\" >Repo Rate vs MCLR Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Impact_of_Repo_Rate_on_Individuals\" >Impact of Repo Rate on Individuals<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#Effect_of_Repo_Rate_on_Businesses\" >Effect of Repo Rate on Businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/repo-rate\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Latest_Repo_Rate_Updates_2024\"><\/span>Latest Repo Rate Updates 2024<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>8th August 2024 &#8211; The government has kept the repo rate at 6.50%, unchanged from the last update.<\/p>\n<table style=\"height: 328px;\" width=\"852\">\n<tbody>\n<tr>\n<td>9th October 2024<\/td>\n<td>Unchanged at 6.5%<\/td>\n<td>Repo rate maintained for tenth consecutive time due to continued inflationary fears<\/td>\n<\/tr>\n<tr>\n<td>10th August 2023<\/td>\n<td>Unchanged at 6.5%<\/td>\n<td>Continuing inflationary fears are preventing MPC from cutting the repo rate<\/td>\n<\/tr>\n<tr>\n<td>8th June 2023<\/td>\n<td>Unchanged at 6.5%<\/td>\n<td>February rate change helped contain inflation in April, unchanged rate to continue this trend<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Repo_Rate\"><\/span><b>What is Repo Rate?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Repo rate or repurchase option rate is the rate at which the RBI lends money to commercial banks in exchange for securities.\u00a0<\/span>The commercial bank and the central bank, or RBI, would come to an arrangement to repurchase the securities at a predetermined cost.<\/p>\n<p>This is carried out when banks are short on cash or must maintain liquidity in the face of uncertain market conditions. The RBI uses the repo rate to control inflation. Let&#8217;s start by understanding how repurchase options work.<\/p>\n<h4>Understanding Repurchase Agreements or Repurchase Options<\/h4>\n<p>When a commercial bank is short on funds, it may enter into an agreement with the RBI.<\/p>\n<p>Under this agreement, the commercial bank sells government securities to the RBI in exchange for cash. Later, the commercial bank buys these securities back at a higher price.<\/p>\n<p><strong>Repo rate determines the price at which the bank buys the securities back from the RBI.\u00a0<\/strong><\/p>\n<p>Repurchase agreements facilitate short-term borrowing and lending of funds between banks and other financial institutions in India. They are an important source of liquidity for commercial banks, especially in times of cash shortfall.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Current_Repo_Rate_in_India\"><\/span><b>Current Repo Rate in India<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The current repo rate in India is 6.50%, after the recent MPC Meeting in June.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Reserve Bank of India (RBI) uses repo rate to control the economy and curb inflation.\u00a0<\/span>The last repo rate hike was in February, when the MPC hiked the repo rate by 25 basis points to 6.50%.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Historical_Repo_Rates_in_India\"><\/span>Historical Repo Rates in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td><b>Date<\/b><\/td>\n<td><b>RBI Repo Rate<\/b><\/td>\n<\/tr>\n<tr>\n<td>9th October 2024<\/td>\n<td>6.50%<\/td>\n<\/tr>\n<tr>\n<td>8th August 2024<\/td>\n<td>6.50%<\/td>\n<\/tr>\n<tr>\n<td>7th June 2024<\/td>\n<td>6.50%<\/td>\n<\/tr>\n<tr>\n<td>5th April 2024<\/td>\n<td>6.50%<\/td>\n<\/tr>\n<tr>\n<td>8th February 2024<\/td>\n<td>6.50%<\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">08-06-2023<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-04-2023<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">08-02-2023<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">07-12-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">30-09-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.90%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">05-08-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">08-06-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.90%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-05-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">08-04-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">10-02-2022<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">08-12-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">09-10-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-08-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-06-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">07-04-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">05-02-2021<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-12-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">09-10-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-08-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">22-05-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">27-03-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">4.40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-02-2020<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.15%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">05-12-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.15%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-10-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.15%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">07-08-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.40%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-06-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-04-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">07-02-2019<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">01-08-2018<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">06-06-2018<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">07-02-2018<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">02-08-2017<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-10-2016<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">05-04-2016<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">29-09-2015<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">02-06-2015<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">04-03-2015<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">15-01-2015<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">28-01-2014<\/span><\/td>\n<td><span style=\"font-weight: 400;\">8.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">29-10-2013<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">20-09-2013<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">03-05-2013<\/span><\/td>\n<td><span style=\"font-weight: 400;\">7.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">17-03-2011<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">25-01-2011<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">02-11-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">16-09-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6.00%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">27-07-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.75%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">02-07-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.50%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">20-04-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.25%<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">19-03-2010<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5.00%<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_Repo_Rate_Work\"><\/span><b>How Does Repo Rate Work?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">All banks in India can approach the RBI and request a loan in times of fund crunch. <\/span><span style=\"font-weight: 400;\">The RBI enters into repurchase agreements (repo) with commercial banks. <\/span><span style=\"font-weight: 400;\">The interest that banks pay for this repo is called the repo rate.<\/span><\/p>\n<p>An increase in repo rate means banks borrowing money from RBI will pay higher interest rates. As a result, commercial banks will borrow less money, thereby lowering money availability in the market, which curbs inflation.<\/p>\n<p>RBI also lowers repo rates under certain macroeconomic conditions such as recession. <span style=\"font-weight: 400;\">The working of repo rate is closely tied to the working of the economy as a whole.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Calculation_of_Repo_Rate\"><\/span>Calculation of Repo Rate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The RBI calculates repo rate based on several economic factors and considerations.\u00a0The process of calculating the repo rate involves the following steps:<\/p>\n<p><strong>1. Economic Analysis:<\/strong> The RBI&#8217;s Monetary Policy Committee (MPC) assesses various macroeconomic indicators and economic data to gauge the overall health of the economy. This analysis includes factors like inflation, GDP growth, industrial production, employment figures, global economic conditions, and other relevant economic indicators.<\/p>\n<p><strong>2. Inflation Targeting<\/strong>: One of the primary objectives of the RBI is to maintain price stability, specifically to control inflation. The MPC sets an inflation target, which is the rate at which the RBI aims to keep inflation within a certain range over a specific time frame. This target guides the decision-making process regarding the repo rate.<\/p>\n<p><strong>3. Demand and Supply of Money<\/strong>: If there is excessive liquidity or an excess supply of money, it may lead to inflationary pressures, and the RBI might increase the repo rate to reduce the money supply. Conversely, if there is an inadequate supply of money, the RBI may reduce the repo rate to encourage borrowing and stimulate economic activity.<\/p>\n<p><strong>4. External Factors<\/strong>: Global economic conditions, geopolitical events, and international trade dynamics also influence the RBI&#8217;s decision on the repo rate.<\/p>\n<p><strong>5. Forward-looking Approach<\/strong>: The MPC adopts a forward-looking approach, taking into account both current economic conditions and future projections to determine an appropriate repo rate level.<\/p>\n<p>Based on the above analysis, the Monetary Policy Committee arrives at a decision regarding the repo rate. The RBI announces the repo rate in its bi-monthly monetary policy statements, where they also provide their rationale for the rate change, if any.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Does_Repo_Rate_Affect_Inflation\"><\/span><b>How Does Repo Rate Affect Inflation?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Inflation is a time of abnormally high prices.\u00a0<\/span><span style=\"font-weight: 400;\">This is caused by high purchasing power in the hands of the people. <\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-13294 aligncenter\" src=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/blog-content\/uploads\/2023\/03\/repo-rate-illustration-e1690369931427.png\" alt=\"inflation and repo rate illustration\" width=\"616\" height=\"152\" srcset=\"https:\/\/blog.razorpay.in\/wp-content\/uploads\/2023\/03\/repo-rate-illustration-e1690369931427.png 527w, https:\/\/blog.razorpay.in\/wp-content\/uploads\/2023\/03\/repo-rate-illustration-e1690369931427-300x74.png 300w\" sizes=\"auto, (max-width: 616px) 100vw, 616px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">In this situation, it is up to the government and the central bank to curb inflation by reducing the people\u2019s purchasing power.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When the central bank increases the repo rate, commercial banks find it tougher to get money \u2013 this means that commercial banks will be more hesitant to lend money to the public.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When loans are not made readily available to the public, purchasing power comes down. This has a chain effect on the economy which eventually brings prices down.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Repo_Rate_vs_Reverse_Repo_Rate\"><\/span><b>Repo Rate vs Reverse Repo Rate<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The RBI sometimes resorts to borrowing money from banks in times of excess market liquidity. The interest rate that the RBI offers to banks when repaying these loans is called the reverse repo rate.<\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Repo Rate<\/b><\/td>\n<td><b>Reverse Repo Rate<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Repo Rate is the rate at which the <strong>RBI lends money to commercial banks.<\/strong><\/span><\/td>\n<td><span style=\"font-weight: 400;\">Reverse Repo Rate is the rate at which the<strong> RBI borrows money from commercial banks.\u00a0<\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">An increase in the repo rate means that commercial banks will have to pay more interest on the money they borrow from the RBI.<\/span><\/td>\n<td><span style=\"font-weight: 400;\">An increase in the reverse repo rate means that commercial banks will get <strong>more incentives to park their funds with the RBI<\/strong>, thereby decreasing the supply of money in the market.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Repo_Rate_vs_MCLR_Rate\"><\/span><b>Repo Rate vs MCLR Rate<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td><b>Repo Rate<\/b><\/td>\n<td><b>Marginal Cost Lending Rate<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Repo rate is the rate at which RBI lends money to commercial banks in case of a shortage of funds.<\/span><\/td>\n<td><span style=\"font-weight: 400;\">MCLR is<\/span><span style=\"font-weight: 400;\"> the minimum interest rate at which a commercial bank can lend money to its customers.\u00a0<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">A higher repo rate makes borrowing from RBI more expensive for commercial banks.\u00a0<\/span><\/td>\n<td><span style=\"font-weight: 400;\">A higher MCLR rate makes borrowing from banks more expensive for customers.\u00a0<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">An increase in the Repo Rate will lead to an increase in the MCLR rate. This is because when RBI hikes the Repo Rate, banks have to pay more to borrow from the RBI.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a result, they increase the MCLR rate to compensate for the increased cost of borrowing. <\/span><span style=\"font-weight: 400;\">When the MCLR is high, people will hesitate before borrowing money from banks, once again leading to lower purchasing power.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Impact_of_Repo_Rate_on_Individuals\"><\/span>Impact of Repo Rate on Individuals<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The most direct impact of a repo rate hike on individuals is that there is an increase in cost of taking a loan from commercial banks.<\/p>\n<p>Since it becomes more expensive for commercial banks to borrow from the RBI, they might not be able to continue giving loans to individuals at the same rate.<\/p>\n<p>So banks will increase interest rates on loans, making it more expensive for the common man to take out a loan from a bank.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Effect_of_Repo_Rate_on_Businesses\"><\/span>Effect of Repo Rate on Businesses<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Just as a hike in repo rate affects an individual&#8217;s ability to take out loans, businesses too will find it difficult to raise capital or funding from banks and financial institutions.<\/p>\n<p><strong>Read more:<a href=\"https:\/\/razorpay.com\/blog\/business-banking\/funding-winter-is-here\/\"> Funding Winter Guide for Businesses<\/a><\/strong><\/p>\n<p>In these times, financial management for businesses becomes incredibly important. Ensuring that business cash flows are as efficient as possible helps in times of cash crunch.<\/p>\n<p>Luckily, fintech solutions like RazorpayX help businesses make banking as seamless and efficient as possible, saving hundreds of hours and reducing the risk of errors by automating banking functions.<\/p>\n<p><span style=\"font-size: 19px;\">RazorpayX allows business owners to open current accounts, <\/span><a style=\"font-size: 19px;\" href=\"https:\/\/razorpay.com\/x\/tax-payments\/\">pay taxes<\/a><span style=\"font-size: 19px;\">, schedule payments, <\/span><a style=\"font-size: 19px;\" href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\">pay vendors<\/a><span style=\"font-size: 19px;\"> seamlessly and check invoices all from a single dashboard.<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/x.razorpay.com\/auth\/signup\/?r=blog_cta_business_banking_repo_rate&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\">Book a Free Demo!<\/a><\/div>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div id=\"rank-math-rich-snippet-wrapper\"><div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-1\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is the latest repo rate?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The current repo rate in India is 6.50% after the RBI increased the repo rate by 25 basis points on 8th February 2023 from the previous repo rate of 6.25%.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-2\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is repo rate and reverse repo rate?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks.<\/p>\n<p>Reverse Repo Rate is the rate at which the Reserve Bank of India (RBI) borrows money from commercial banks. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-3\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Why is RBI increasing repo rate?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The RBI increases repo rate to curb inflation. When the central bank increases the repo rate, commercial banks find it tougher to get money \u2013 this means that commercial and retail banks will be more hesitant to lend money to the public. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-4\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is the current repo rate?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The current repo rate is 6.50%<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-5\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is BPS or basis point?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Basis points are a unit of measurement used to describe percentage changes. One basis point, or bps, is 0.01%, or 1\/100th of a percentage, so 100 basis points is 1%.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-6\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is CRR and SLR?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>CRR or Cash Reserve Ratio is the percentage of a bank\u2019s total deposits that must be kept in reserve with the central bank in the form of cash.<\/p>\n<p>SLR or Statutory Liquidity Ratio is the minimum percentage of a bank's net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Latest Repo Rate Updates 2024 8th August 2024 &#8211; The government has kept the repo rate at 6.50%, unchanged from the last update. 9th October 2024 Unchanged at 6.5% Repo rate maintained for tenth consecutive time due to continued inflationary fears 10th August 2023 Unchanged at 6.5% Continuing inflationary fears are preventing MPC from cutting<\/p>\n","protected":false},"author":106,"featured_media":11653,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[516,307,451],"class_list":{"0":"post-11652","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-inflation","9":"tag-rbi","10":"tag-repo-rate"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11652","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=11652"}],"version-history":[{"count":2,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11652\/revisions"}],"predecessor-version":[{"id":18805,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11652\/revisions\/18805"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/11653"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=11652"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=11652"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=11652"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}