{"id":12241,"date":"2026-05-22T13:39:13","date_gmt":"2026-05-22T13:39:13","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/repo-rate-2\/"},"modified":"2026-05-22T13:39:13","modified_gmt":"2026-05-22T13:39:13","slug":"repo-rate-2","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/repo-rate-2\/","title":{"rendered":"Repo Rate"},"content":{"rendered":"<p>The <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/repo-rate\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Repo Rate<\/a> is the interest rate at which the Reserve Bank of India (RBI) lends short-term funds to commercial banks against government securities. It is the central pillar of India&#x2019;s <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/monetary-policy\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">monetary policy<\/a>. Changes in the repo rate ripple through to bank lending rates, deposit rates, <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/bond-yield\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">bond yield<\/a>s, and even <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">equity<\/a> valuations. Indian investors must understand the repo rate to make se<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nse\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>nse<\/a> of <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/inflation\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">inflation<\/a>, growth, and market cycles.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>Repo Rate is the cost at which RBI lends to commercial banks.<\/li>\n<li>Set by the Monetary Policy Committee (MPC) at scheduled meetings.<\/li>\n<li>Higher repo = tighter monetary policy; lower repo = easier policy.<\/li>\n<li>Affects EMIs, deposit rates, bond <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/yield\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">yield<\/a>s, and equity market sentiment.<\/li>\n<li>India&#x2019;s neutral or natural repo rate is widely debated, typically 5&#x2013;6%.<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"how-the-repo-rate-works\">How the repo rate works<\/h2>\n<p>Commercial banks borrow overnight from the RBI by selling government securities under a repurchase (repo) agreement &#x2014; they promise to buy back the securities the next day at a slightly higher price. The difference, expressed as an annual interest rate, is the repo rate.<\/p>\n<h2 id=\"monetary-policy-and-the-repo\">Monetary policy and the repo<\/h2>\n<p>The RBI&#x2019;s Monetary Policy Committee meets six times a year to review inflation, growth and macroeconomic stability. Decisions to raise, lower or hold the repo rate signal RBI&#x2019;s stance:<\/p>\n<ul>\n<li><strong>Rate hike:<\/strong> Combat inflation; cool down demand.<\/li>\n<li><strong>Rate cut:<\/strong> Stimulate growth; encourage borrowing.<\/li>\n<li><strong>Pause:<\/strong> Wait-and-watch stance, often during transition periods.<\/li>\n<\/ul>\n<h2 id=\"impact-on-borrowers-and-savers\">Impact on borrowers and savers<\/h2>\n<table>\n<tr>\n<th>Stakeholder<\/th>\n<th>Impact of repo cut<\/th>\n<th>Impact of repo hike<\/th>\n<\/tr>\n<tr>\n<td>Home loan borrowers<\/td>\n<td>Lower EMIs (if floating)<\/td>\n<td>Higher EMIs<\/td>\n<\/tr>\n<tr>\n<td>FD depositors<\/td>\n<td>Lower interest<\/td>\n<td>Higher interest<\/td>\n<\/tr>\n<tr>\n<td>Equity markets<\/td>\n<td>Generally positive<\/td>\n<td>Generally negative short-term<\/td>\n<\/tr>\n<tr>\n<td><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/bond-market\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Bond market<\/a>s<\/td>\n<td>Yields fall, prices rise<\/td>\n<td>Yields rise, prices fall<\/td>\n<\/tr>\n<\/table>\n<h2 id=\"repo-reverse-repo-and-sdf\">Repo, Reverse Repo, and SDF<\/h2>\n<p>The corridor of policy rates includes:<\/p>\n<ul>\n<li><strong>Repo Rate:<\/strong> RBI lends to banks.<\/li>\n<li><strong>Reverse Repo:<\/strong> RBI borrows from banks.<\/li>\n<li><strong>SDF (Standing Deposit Facility):<\/strong> New floor of the corridor since 2022, where banks park surplus <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/liquidity\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">liquidity<\/a>.<\/li>\n<li><strong>MSF (Marginal Standing Facility):<\/strong> Banks can borrow above the repo rate when facing emergency liquidity needs.<\/li>\n<\/ul>\n<h2 id=\"repo-rate-in-your-investing-decisions\">Repo rate in your investing decisions<\/h2>\n<ul>\n<li>Rising rates favour banks (higher net interest margins) and savers; hurt rate-sensitive <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/sector\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">sector<\/a>s (auto, real estate).<\/li>\n<li>Falling rates support equity valuations and growth-sensitive sectors.<\/li>\n<li>Watch bond fund duration &#x2014; longer durations gain more on rate cuts but lose more on hikes.<\/li>\n<li>Equity market <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/volatility\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">volatility<\/a> often spikes around MPC announcements.<\/li>\n<\/ul>\n<h2 id=\"how-to-follow-mpc-decisions\">How to follow MPC decisions<\/h2>\n<p>The RBI publishes MPC meeting outcomes and minutes on its website. Major business media tracks the announcement closely. Watch the RBI Governor&#x2019;s statement for forward guidance &#x2014; it often signals future direction even when current rates remain unchanged.<\/p>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"who-decides-the-repo-rate\">Who decides the repo rate?<\/h3>\n<p>The six-member Monetary Policy Committee (MPC) chaired by the RBI Governor.<\/p>\n<h3 id=\"how-often-is-the-repo-rate-changed\">How often is the repo rate changed?<\/h3>\n<p>MPC meets six times a year. Rates can be changed, held or signalled at any meeting.<\/p>\n<h3 id=\"does-the-repo-rate-affect-ipo-subscription\">Does the repo rate affect <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/ipo\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>IPO<\/a> subscription?<\/h3>\n<p>Indirectly &#x2014; higher rates can dampen overall sentiment and reduce IPO appetite.<\/p>\n<h3 id=\"where-can-i-see-repo-rate-updates\">Where can I see repo rate updates?<\/h3>\n<p>RBI website, business newspapers, and most <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/broker\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">broker<\/a> research pages including Lemonn.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Repo Rate is the interest rate at which the Reserve Bank of India (RBI) lends short-term funds to commercial banks against government securities. It is the central pillar of India&#x2019;s monetary policy. Changes in the repo rate ripple through to bank lending rates, deposit rates, bond yields, and even equity valuations. Indian investors must [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12241","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"The Repo Rate is the interest rate at which the Reserve Bank of India (RBI) lends short-term funds to commercial banks against government securities. It is the central pillar of India&#x2019;s monetary policy. Changes in the repo rate ripple through to bank lending rates, deposit rates, bond yields, and even equity valuations. Indian investors must&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12241","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12241\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12241"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}