What is the latest RBI repo rate? What is the latest RBI reverse repo rate?
This article shows you the current and historical values of the RBI repo and reverse repo rates.
What is the latest RBI repo rate? What is the latest RBI reverse repo rate?
Posted on 15 Jan 2023 • Updated on: 08 Feb 2024
Author: Sayan Sircar
7 mins read
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This article shows you the current and historical values of the RBI repo and reverse repo rates.
📚 Topics covered:
- What are the current repo and reverse repo rates?
- What is RBI doing with the repo rate recently?
- Rate history in India
- Understanding the Repo Rate
- Understanding the Reverse Repo Rate
What are the current repo and reverse repo rates?
What is the latest repo rate?
The latest repo rate is 6.5%. This rate was last reviewed by RBI on 08 Feb 2024.
What is the latest reverse repo rate?
The latest reverse repo rate is 3.35%. This rate was last reviewed by RBI on 01 Dec 2022.
What is RBI doing with the repo rate recently?
The repo rate is currently going up in India due to inflationary pressure.
RBI, in line with other central banks, has hiked the Repo rate from 4.00% to 6.50% in quick succession:
- 06-Apr-2023 to 08-Feb-2024: RBI kept the repo rate unchanged at 6.50%.
- 08-Feb-2023: RBI hiked the repo rate to 6.50% from 6.25%.
- 07-Dec-2022: RBI hiked the repo rate to 6.25% from 5.90%.
- 30-Sep-2022: RBI hiked the repo rate to 5.90% from 5.40%.
- 05-Aug-2022: RBI hiked the repo rate to 5.40% from 4.90%.
- 08-Jun-2022: RBI hiked the repo rate to 4.90% from 4.40%.
- 04-May-2022: RBI hiked the repo rate to 4.40% from 4.00%.
The hike is a part of inflation-taming measures put in place by global central banks. For RBI, the Repo rate is now rising towards the pre-COVID-19 pandemic days when the rate was 5.15%. It was lowered twice in March 2020 (to 4.40%) and then again in May 2020 (to 4.00%) to negate the impact of the economic slowdown caused by the pandemic.
As inflation has been rising as the economy recovered, the repo rate rise was inevitable, and further rate increases are unavoidable. The RBI is planning more rate hikes.
Rate history in India
The charts below show the history of the RBI repo and reverse repo rates over time:
Chart: Arthgyaan • Source: RBI • Get the data
Chart: Arthgyaan • Source: RBI • Get the data
Understanding the Repo Rate
Repo rate is the rate of interest RBI, the country’s central bank, charges all other banks when borrowing from RBI. The higher the repo rate, the more banks have to pay RBI when borrowing. As a result, the bank charges higher interest rates to people who borrow. The bank offers higher rates for depositors in savings accounts and fixed deposits.
The repo rate, therefore, directly impacts
- savings account, fixed deposit and recurring deposit rates
- borrowing rates for personal, gold, car, home and other loans
- rates of loans that are given to businesses
The basic interest rate equation for a loan is:
Rates for loans = Base rate + Spread
The base rate is derived from the RBI Repo rate. The spread depends on the loan type and the borrower’s credit quality. For example, home loans have a lower spread since they are collateralised. In contrast, personal loans, being without collateral, have a higher spread.
The repo rate, and its counterpart, the reverse repo rate, which RBI offers to banks for depositing money with RBI, are crucial monetary policy tools that affect liquidity and inflation. The higher the repo rate, the higher the loan rates and the more difficult it is to borrow. The lower the amount of borrowing, the less the money supply since borrowers spend their loans for their purpose. Less spending by borrowers or depositors, who are attracted by higher deposit rates, the lesser the amount of money available in the economy, thereby cooling inflation.
Related:
Repo rates are rising - what should investors do?
Understanding the Reverse Repo Rate
When a bank has excess money, it can lend to the RBI and get some interest. This interest rate that the RBI offers to banks is the reverse repo rate. The reverse repo rate is a monetary policy tool where the RBI can remove excess liquidity from the economy by offering higher rates.
When banks deposit their money with the RBI, they get government securities in return as collateral.
Related Articles
- Repo rates are rising - what should investors do?
- What should you do when your home loan interest rates go up?
- Should you prepay your home loan at the beginning or at the end of the tenure?
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