Repo Rate, Explained: Why One RBI Number Moves Your Loan EMI

The repo rate is the rate at which the Reserve Bank of India lends short-term funds to commercial banks. When it changes, banks typically adjust their own lending rates in the same direction, affecting everything from home loan EMIs to corporate borrowing costs.

The Monetary Policy Committee reviews the rate roughly every two months, weighing inflation trends against the need to support economic growth.

A rate hike is meant to cool inflation by making borrowing more expensive; a cut is meant to stimulate spending and investment by making it cheaper — though transmission to actual bank lending rates is rarely immediate or complete.

“The repo rate is the interest rate at which the RBI lends to commercial banks — and it ripples through the entire lending market.”