Have you ever considered how a bank determines interest rates for loans or savings instruments? Central Bank of India – The Reserve Bank of India loans money to commercial banks at a certain rate based on the consumer interest rate. Every few months, the Monetary Policy Committee (MPC) publishes monetary policy.
Latest Repo Rate and Reverse Repo Rate 2026
The Reserve Bank of India has decided not to adjust the repo rate in February 2026. The announcement was made following the MPC’s (Monetary Policy Committee) meeting in the first week of February. The repo rate is maintained at 5.25%. This time, the RBI decided not make any modifications because prices are generally stable and the economy is performing well. Many people expected there to be a minor cut, but this did not happen. Other rates connected to the repo rate remained unchanged.
What This Means?
This means that banks will continue to borrow from the RBI at the 5.25% repo rate for the time being, therefore most home loans and loan EMIs based on this benchmark will remain unchanged. There was expectation for a cut following the budget and previous rate cuts, however this policy maintained the rate.
Repo Rate and Reverse Repo Rate in India
The following are the current and reverse repo rates in India:
|
Type of rate |
Rate |
| Repo Rate | 5.25% |
| Reverse Repo |
3.35% |
Definition of Repo Rate and Reverse Repo Rate
The Monetary Policy Committee (MPC) decides the Repo Rate and the Reverse Repo Rate during its bimonthly meetings. The Governor of the Reserve Bank of India heads the Monetary Policy Committee. Let us define the terms repo rate and reverse repo rate.
What is Repo Rate?
The word repo rate is derived from Repurchasing Option or Repurchasing Agreement, which refers to the price at which the Reserve Bank of India (Central Bank of India) lends money to commercial banks during a cash crisis. Furthermore, the same rate is employed to control inflation. If there is inflation, the RBI boosts the repo rate, discouraging commercial banks from borrowing from the Central Bank of India. If commercial banks do not borrow from central banks, the economy’s money supply shrinks and inflation is kept under control. The opposite is true if there is no inflation in the country.
What is Reverse Repo Rate?
The reverse repo rate is the rate at which Indian commercial banks lend to the RBI. The Monetary Policy Committee decides on this rate during its bi-monthly meeting. The reason behind lending money to commercial banks is that in exchange, the RBI offers them a competitive interest rate on surplus funds. There is an indirect relationship between the reverse repo rate and the money supply; when the reverse repo rate falls, the money supply rises, and vice versa.
Historic Repo Rate in India
For past few years repo rate in India has been as follows:-
| Repo Rate period | Repo Rates |
|
6th February 2026 |
5.255 |
| 5 December 2025 |
5.25% |
|
1 October 2025 |
5.50% |
| 7 August 2025 |
5.50% |
|
6 June 2025 |
5.50% |
| 9 April 2025 |
6.00% |
|
7 February 2025 |
6.25% |
| 6 December 2024 |
6.50% |
|
9 October 2024 |
6.50% |
| 8 August 2024 |
6.50% |
|
8 June 2024 |
6.50% |
| 8 February 2024 |
6.50% |
|
8 December 2023 |
6.50% |
| 10 October 2023 |
6.50% |
|
10 August 2023 |
6.50% |
|
8 June 2023 |
6.50% |
| 6 April 2023 |
6.50% |
| 8 February 2023 |
6.50% |
|
7 December 2022 |
6.25% |
|
30 September 2022 |
5.90% |
|
05 August 2022 |
5.40% |
|
08 June 2022 |
4.90% |
|
May 2022 |
4.40% |
Historic Reverse Repo Rate in India
Following is the historic reverse repo rate data:
|
Release Date |
Reverse Repo Rate |
|
February 2026 |
3.35% |
|
December 2025 |
3.35% |
|
October 2025 |
3.35% |
|
06 June 2025 |
3.35% |
|
09 April 2025 |
3.35% |
|
07 February 2025 |
3.35% |
|
09 December 2024 |
3.35% |
|
06 December 2024 |
3.35% |
|
09 October 2024 |
3.35% |
|
08 August 2024 |
3.35% |
|
07 June 2024 |
3.35% |
|
05 April 2024 |
3.35% |
|
08 February 2024 |
3.35% |
|
08 December 2023 |
3.35% |
|
06 October 2023 |
3.35% |
|
10 August 2023 |
3.35% |
|
08 June 2023 |
3.35% |
|
06 April 2023 |
3.35% |
|
08 February 2023 |
3.35% |
|
07 December 2022 |
3.35% |
| 30 September 2022 |
3.35% |
|
05 August 2022 |
3.35% |
|
08 June 2022 |
3.35% |
| 04 May 2022 |
3.35% |
|
08 April 2022 |
3.35% |
| 10 February 2022 |
3.35% |
Who Decides Repo Rate and Reverse Repo Rate in India?
In India, the Monetary Policy Committee (MPC), led by the Governor of the Reserve Bank of India (RBI), decides the repo rate and reverse repo rate.
What is the Difference between Repo Rate and Reverse Repo Rate?
The distinction between repo and reverse repo rates is that:
A repo rate is the rate at which the RBI loans money to commercial banks.
Meanwhile, the reverse repo rate allows commercial banks to deposit excess cash with the Reserve Bank of India and earn interest in return.
Both these rates are compounded annually.
Here is an example of Repo Rate: For example, if HDFC Bank borrows Rs 10 crore from the RBI at a 5.25% interest rate, it will be required to repay Rs 10.55 crore after one year.
Here is an example of a Reverse Repo Rate: For example, if Axis Bank deposits Rs 10 crore of extra cash with RBI at a 3.35% rate, it will receive Rs 10.34 crore from the RBI after one year.
Process of RBI Lending Money to Commercial Banks
The Reserve Bank of India does not lend to all commercial banks. First, the RBI verifies securities and bonds. It then holds these as security until the borrowed amount is returned, including the repo rate-based interest. If the bank fails to repay, the RBI has the ability to sell the securities.
Impact of Repo Rate and Reverse Repo Rate on the Economy
As previously noted, the repo rate and reverse repo rate fluctuate from time to time. Both rates have an impact on the economy. Let us consider the impact of change.
Impact of repo rate
The repo rate is an important tool for the country’s economic progress. It also has a substantial impact on the country’s inflation and contributes to the control of the money supply and liquidity. To limit money flow, the RBI raises the repo rate during periods of excessive inflation. When interest rates rise, banks will face greater borrowing costs. It also reduces investment and money supply in the economy. As a result, it has a negative economic impact while also contributing to the management of inflation.
If the RBI has to inject cash into the economy, the repo rate is lowered. This encourages commercial banks to borrow from the RBI rather than lending to individuals. This helps to boost the economy’s overall growth rate.
Impact of reverse repo rate
When the reserve repo rate rises, it has an influence on the economy. In such cases, commercial banks find it more practical to deposit the funds in the RBI rather than lend them to individuals for various purposes. They can also receive a decent return on their investment. All of these occurrences will improve the rupee’s value. Inflation is also regulated by raising the reverse repo rate and lowering it when conditions are favourable for growing inflation.
Another factor that influences a rise or drop in reverse repo rates is demand for house loans. Banks lower home loan rates when the reverse repo rate is higher; they prefer to lend to individuals and vice versa.
Impact of Repo Rates on Home Loans
A modest shift in repo rates results in a significant change in house loans. Here is a basic explanation of how it affects house loans:
The loan rates in the economy fluctuate based on repo rates. An increase in repo rates by the RBI will result in an increase in home loan rates. As the interest rate rises, house loans will become more expensive.
An increase in the repo rate will raise the equivalent monthly installment (EMI). An increase in the EMI diverts more funds to loan repayments. Eventually, this reduces the household’s discretionary income.
Repo rates also have an impact on home loan eligibility. An increase in repo rates makes house loans more expensive. This, in turn, prompts banks to intensify their scrutiny while disbursing loans. Banks also stringently check applicants for loans. As a result, the eligibility criteria for loans grow stricter.
How Will New Repo Rate Impact Home Loans
In this section, we will look at how the new repo rate will affect the house loan rate and EMI.
The repo rate and home loan rates are directly associated; the higher the repo rate, the higher the home loan interest rate, and vice versa, because the repo rate is the rate at which the Reserve Bank of India (RBI) loans to other financial institutions. A 50 basis point fall in the repo rate results in a 0.50 percent decrease in house loans.
Relation Between Repo Rate and Home Loan Interest Rate
Let us understand the relationship between repo rate and home loan interest rate using an example:
| Repo Rate | Loan Interest Rate |
| -0.50 per cent | -0.50 per cent |
However, this adjustment will only affect individuals who have chosen a floating home loan interest rate.
How Decreased Repo Rate Impacts Home Loan EMI
A lower repo rate will help lower the EMI on your house loan. Let us see, for example, how this drop will affect house loan EMI for various home loan amounts:
Home loan tenure is 15 years
Home loan rate of interest before 06 June 2025: 8.00%
Home loan rate of interest after 06th June 2025: 7.50%
|
Home Loan Amount |
EMI as per the revised Interest Rate | EMI before the repo rate change | Difference |
|
50 Lakh |
INR 46,199 | INR 47,823 |
INR 1,624 |
|
40 Lakh |
INR 36,960 | INR 38,259 |
INR 1,299 |
| 30 Lakh | INR 27,720 | INR 28,694 |
INR 974 |
Will home loans really be impacted, learn the nuances in this panel discussion.
The Reserve Bank of India reduced the repo rate by 50 basis points in June 2025. The repo rate represents the interest rate at which the central bank loans to commercial banks. The market and customers had been waiting for this drop, which would have a direct impact on equated monthly instalments (EMIs). In reality, in 2019, the RBI linked the repo rate to the External Benchmark Lending Rate (EBLR), implying that any drop should be passed on to customers.
What is RBI Monetary Policy?
The RBI Monetary Policy is viewed as a beneficial step toward strengthening the country’s financial system, which in turn serves to enhance the economy. It is a monetary policy created by the Central Bank of India (Reserve Bank of India) to govern the country’s financial affairs. It regulates the supply of money, the cost of credit, lending rates, credit distribution, and fund availability. Generally, the RBI’s monetary policy is reviewed six times during the fiscal year. The three primary objectives of RBI monetary policy are:
Economic growth
Exchange rate stability
Control of inflation
Elements of a Repo Transaction
These are the parameters on which the RBI agrees to carry out transactions with banks:
Controlling Economy Squeezes
The central bank adjusts the repo rate in response to inflationary pressures. As a result, it attempts to keep inflation under control in order to keep the economy stable.
Short-Term Borrowing
The RBI provides short-term loans. The maximum time limit for a post is overnight. During this phase, banks buy back their securities and deposit them at a predetermined price.
Hedging and Leveraging
The RBI attempts to hedge and leverage by purchasing bonds and securities from banks and paying them cash in exchange for the security placed.
Liquidity Cash Reserve
As a safety measure, the RBI lends money to banks to maintain liquidity or cash reserves.
Collaterals and Securities
The RBI accepts securities such as bonds and gold.
How Homebuyers Can React Smartly to Repo Rate Changes
Changes in repo rates have a direct impact on house loans. Homebuyers should be prepared for interest rate increases. A systematic approach helps to control expenditures and reduce stress.
Pay close attention to RBI policy revisions. Repo rate decisions influence bank lending rates.
Examine your home loan facts. Floating-rate loans fluctuate more frequently than fixed-rate loans.
When rates fall, contact your lender. Request a rate reduction or loan reset.
Use online EMI calculators. Check out how much you can save each month.
Compare loan offers on the market. Switching lenders may reduce your interest payments.
Keep the prepayment options open. Extra payments help to lower overall interest.
If interest rates climb, avoid panic buying. Higher EMIs can stretch your finances.
Create an emergency fund. It helps to handle unexpected EMI rises.
Select a tenure that is comfortable for you. Longer tenures result in reduced EMI but higher interest.
Maintain a good credit score. Banks provide better rates to dependable borrowers.
Homebuyers should think long-term. Repo rates may rise or fall. However, prudent planning ensures financial stability. A balanced decision today results in a secure house tomorrow.
Conclusion: Repo Rate and Reverse Repo Rate
The repo rate is the rate at which the RBI (Central Bank of India) loans money to other commercial banks. Meanwhile, the reverse repo rate is the rate at which commercial banks can deposit surplus funds with the RBI and earn a respectable interest rate. The current and reverse repo rates are 5.25% and 3.35%, respectively. The Monetary Policy Committee (MPC), chaired by the RBI governor, decides on these rates at its bimonthly meeting.
Stable repo rates create a strong window for real estate investment.
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