LoansFinancial Glossary
Repo Rate
Definition
The interest rate at which the Reserve Bank of India lends money to commercial banks. It is the primary tool RBI uses to control inflation and liquidity in the economy. When RBI raises the repo rate, borrowing costs increase across the economy; when it cuts the rate, borrowing becomes cheaper.
Why It Matters
Since October 2019, all new floating-rate retail loans are linked to external benchmarks, primarily the repo rate. A 25 bps repo rate cut directly reduces your home loan EMI (or tenure). Understanding repo rate trends helps you time major loan decisions and choose between fixed and floating rates.