In the world of monetary policy, two interest rates play important roles: the REPO Rate and the Reverse REPO Rate in India. These rates, set by the central bank, significantly impact the functioning of financial markets and the overall economy. Let’s dive into their definitions and impact.

What is REPO Rate?

The REPO Rate stands for “Repurchase Rate”. Repo Rate is an interest rate at which commercial banks such as State Bank of India, Bank of Baroda, Indian Bank etc. borrows loan in exchange for securities from the central bank i.e. Reserve  Bank of India(RBI) for a certain period of time. The agreement is made between both the bodies to repurchase the securities on a late date at a set price.

The present REPO Rate is unchanged i.e. 6.50% as of announcement made on 8th October 2024 by the RBI.

When commercial banks run out of money to manage the liquidity under some unstable market circumstances, the REPO Rate comes into play. The importance of REPO Rate is that the central bank, RBI uses it to manage the cash flow in the country. REPO Rate is also used to control the inflation by the monetary authority of India.

How does the REPO Rate relates to the Common man?

The REPO Rate is the interest that RBI implies on commercial bank’s loans. The increase in REPO Rate will increase the loan interest by commercial banks to its customers. It will also impact Fixed Deposit, Mutual Funds and Saving Account interest. On the other hand, a decrease in the repo rate infuses more money into the market, supporting economic growth.

The REPO Rate over the last 5 years

Implementation Date	REPO Rate
8th Oct 2024	6.5%
8th August 2024	6.5%
7th June 2024	6.5%
8th February 2024	6.5%
8th December 2023	6.5%
8th June 2023	6.5%
8th February 2023	6.5%
7th December 2022	6.25%
30th September 2022	5.9%
5th August 2022	5.4%
4th May 2022	4.4%
9th October 2020	4.0%
22nd May 2020	4.0%
27th March 2020	4.0%
7th August 2019	5.0%
6th June 2019	6.0%
4th April 2019	6.0%
7th February 2019	6.0%

What is Reverse REPO Rate?

Reverse REPO Rate is an interest that the Central Bank RBI pays to the commercial banks of the country for depositing excess money . Reverse REPO Rate is the interest charged by the commercial banks on RBI. 

The present Reverse REPO Rate is 3.35% as of announcement made on 5th April 2024 by RBI.

When the central bank needs to manage cash flow, it borrows excess funds from banks at the reverse repo rate.

Tired of guessing the market? Unicorn Signals empowers you with powerful tools like daily intraday signals and market predictions. Download the Unicorn Signals app today and take control of your investments!

Let’s summarize the difference between REPO Rate and Reverse REPO Rate.

REPO Rate	Reverse REPO Rate
The interest rate at which the central bank lends loans to commercial banks.	The rate at which the central bank pays commercial banks to deposit excess funds with the central bank.
Regulates liquidity in the economy.	Manages cash flow in the market.
Commercial banks borrow from the central bank and repay at the repo rate. Collateral: Securities (e.g., treasury bills).	Central bank borrows excess liquidity from banks at the reverse repo rate.
Affects public borrowings (e.g., home loans, EMIs).	Commercial banks receive interest on excess funds parked with the central bank.

FAQs

What is the current REPO Rate?

The Present REPO Rate is 6.50%.

What is the Current Reverse REPO Rate?

The Present Reverse REPO Rate is 3.35%.

What is the highest REPO Rate recorded in Indian history?

The Highest REPO Rate was recorded 14.50%  in August 2000 and lowest 4.25% in April 2009.

Who calculates the REPO Rate of India?

The  REPO Rate is calculated by the Monetary Policy Committee (MPC) of RBI. This  committee has 6 members. Three members are from RBI and three members are from the Central Government.