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Repo and reverse repo are Reserve Bank of India (RBI) rates used in transactions with banks, not rates that households receive directly. Under a repo operation, RBI lends liquidity to a bank against eligible securities; under a reverse-repo operation, a bank places funds with RBI and RBI absorbs liquidity. The repo rate is the main policy rate. The fixed reverse repo remains an RBI rate, but since the Standing Deposit Facility (SDF) was introduced in April 2022, SDF—not the fixed reverse repo—is the lower bound of the routine Liquidity Adjustment Facility (LAF) corridor.
For a borrower, a repo-rate change matters only if the loan is linked to an eligible external benchmark and the contractual reset passes the change through. For a saver, a repo move can influence bank deposit pricing, but it does not automatically change the interest on an existing fixed deposit or make the reverse-repo rate your savings return.
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Repo rate and reverse repo rate: the difference at a glance
| Point of comparison | Repo operation | Reverse-repo operation |
|---|---|---|
| Direction of funds | RBI lends funds to a bank; the bank provides eligible securities as collateral. | A bank places funds with RBI; RBI absorbs the bank’s surplus liquidity. |
| Operational purpose | Inject liquidity into the banking system when banks need funds. | Absorb liquidity when banks have surplus funds. |
| Household relationship | Indirectly influences some floating-rate loan benchmarks and bank pricing. | Does not represent the interest paid on your savings account or fixed deposit. |
| Place in the current LAF corridor | The policy repo rate is the middle of the corridor. | The fixed reverse repo is discretionary; SDF is the current corridor floor. |
Both are wholesale central-bank operations. A retail customer does not open a repo or reverse-repo transaction with RBI, and RBI does not set an individual’s home-loan or deposit contract directly.
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RBI lends against securities
In a repo, a bank obtains short-term liquidity from RBI while providing eligible securities under an agreement to reverse the transaction. The bank pays the repo rate for that borrowing period. RBI can conduct overnight or term repo auctions through the LAF, depending on the liquidity-management operation.
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The policy repo rate is therefore a signal for the general cost of short-term funds in the banking system. A change in that rate can affect money-market rates and, over time, other lending and deposit rates. It is not a promise that every bank product will reprice by the same number of percentage points.
Why RBI changes the repo rate
RBI uses the policy rate as one of its monetary-policy instruments. A higher repo rate generally makes funding more expensive for banks and can restrain demand; a lower rate can make system liquidity cheaper and support borrowing and spending. The eventual effect depends on liquidity conditions, competition, risk premiums, loan contracts and the time it takes for banks to adjust prices.
How a reverse-repo transaction works
Banks place surplus funds with RBI
A reverse repo is the opposite cash flow. A bank lends funds to RBI for the operation and receives interest, while RBI removes that liquidity from the banking system. The transaction can help RBI manage short-term surplus cash and keep money-market conditions aligned with its policy stance.
Why “reverse repo equals the savings rate” is wrong
Your bank may invest some surplus liquidity with RBI, but your deposit is a separate contract between you and the bank. The bank decides the savings-account rate or fixed-deposit coupon under its product terms. Its pricing also reflects funding needs, competition, liquidity, operating costs and the maturity of the deposit. The reverse-repo rate is not the return credited to your account.
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India’s current policy-rate corridor
RBI’s rate table displayed the following observations as at 1:00 p.m. on July 29, 2026:
| RBI rate | Rate shown | Role |
|---|---|---|
| Policy repo rate | 5.25% | Middle of the LAF corridor and the principal policy rate. |
| Standing Deposit Facility (SDF) | 5.00% | Lower bound of the LAF corridor; absorbs funds without requiring collateral from RBI. |
| Marginal Standing Facility (MSF) | 5.50% | Upper bound; provides an overnight borrowing facility to eligible banks against specified securities. |
| Fixed reverse repo rate | 3.35% | An RBI liquidity-absorption rate; fixed-rate reverse-repo operations are discretionary rather than the routine corridor floor. |
These figures are dated observations, not a guarantee that the rates were unchanged on October 13, 2026. Check RBI’s current-rates page for a later announcement or revision. The important terminology point is that describing the fixed reverse repo as today’s standing LAF floor is outdated: SDF now performs that floor function.
Why the repo rate can reach your loan statement
Which loans are covered by external-benchmark rules
For covered new floating-rate personal and retail loans, and floating-rate loans to micro and small enterprises, scheduled commercial banks (excluding regional rural banks) must use an eligible external benchmark under RBI rules. Eligible choices can include the RBI policy repo rate, specified Treasury-bill yields or another benchmark published by the Financial Benchmarks India Pvt. Ltd. (FBIL). The bank adds a contractual spread to that benchmark.
Not every loan is linked to the repo rate. Older loans may use a different benchmark, and fixed-rate loans do not reprice with every policy announcement. The sanction letter, loan agreement and statement should identify the benchmark, spread, reset frequency and reset date.
What happens after a repo-rate change
- RBI announces a policy change. The benchmark itself moves if your contract uses the policy repo rate.
- Your bank waits for the contractual reset. Resetting may be monthly, quarterly, half-yearly or on another schedule specified in the agreement; an announcement does not necessarily change the rate that day.
- The spread is applied. The bank’s documented spread, including any permitted risk or operating components, is added to the benchmark. A repo move does not automatically change the spread.
- The repayment schedule is recalculated. Depending on the contract and the bank’s process, the change may alter the EMI, the remaining tenor, or both.
- You receive or can request the revised details. Check the effective date, interest rate, EMI, outstanding principal and remaining tenor on the statement or notice.
Why two borrowers can see different outcomes
Even when two loans use the same external benchmark, their outstanding principals, spreads, remaining tenors, reset dates and repayment structures may differ. One bank may hold the EMI steady and extend the tenor within contractual limits; another may change the EMI. A borrower whose reset date has not arrived may see no immediate movement, while a borrower resetting that month may see a change.
What a borrower should check
- The exact benchmark name and the date on which it is observed.
- The contractual spread and any conditions allowing it to change.
- Reset frequency and the next reset date.
- Outstanding principal, remaining tenor and current EMI.
- Whether the loan is fixed, floating or has a fixed period followed by floating pricing.
- The bank’s notice for the effective date and revised amortisation schedule.
If the notice does not match the sanction terms, ask the lender for the calculation and the clause used. Do not assume that an MPC announcement alone proves an error or guarantees a particular EMI reduction.
What historical pass-through data actually show
RBI’s 2024-25 report provides a useful illustration of transmission, not a forecast for any individual loan. From May 2022 to August 2024, the policy repo rate rose cumulatively by 250 basis points. Over that period, weighted-average lending rates on fresh rupee loans rose 190 basis points, while rates on outstanding rupee loans rose 119 basis points.
| Measure | Change, May 2022–August 2024 | What it illustrates |
|---|---|---|
| Policy repo rate | +250 basis points | The cumulative policy movement during the period. |
| Fresh rupee-loan weighted-average lending rate | +190 basis points | Pricing on newly sanctioned or repriced loans did not move one-for-one with the policy rate. |
| Outstanding rupee-loan weighted-average lending rate | +119 basis points | The existing-loan stock adjusted more slowly and by a different amount. |
Transmission is the process through which policy-rate impulses spread to money-market rates, bond yields, bank deposit and lending rates, and asset prices. The RBI defines it as: “Monetary transmission is the process through which monetary policy impulses in the form of policy rate changes by a central bank are transmitted to the entire spectrum of interest rates such as money market rates, bond yields, bank deposit and lending rates and asset prices such as stock prices and house prices.”
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The figures show why a borrower should use the loan contract and account statement, rather than multiply a policy-rate change directly by the loan balance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How repo changes affect savings accounts and fixed deposits
Bank deposit pricing is indirect
A bank sets the rate it offers on a savings account or term deposit. It may respond to a repo change, but the response can be delayed, partial or different across products and tenors. Banks also price deposits according to their need for funds and the maturity profile of their liabilities.
Fresh deposits and existing deposits are different
A fresh fixed deposit is booked at the rate available on the booking date, subject to the bank’s conditions. An existing fixed deposit normally continues at its contracted rate until maturity; a later policy move does not rewrite that coupon. A savings-account rate may be variable under the account terms, so read the bank’s product disclosure rather than applying a fixed-deposit rule to it.
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What RBI’s historical deposit data show
For May 2022 to August 2024, RBI reported that weighted-average domestic term-deposit rates increased by 243 basis points for fresh deposits and 190 basis points for outstanding deposits. In the first half of 2024-25 through August 2024, outstanding deposit rates increased by 4 basis points, while fresh-deposit rates moderated by 16 basis points. These are historical observations, not current quotations from any particular bank.
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| Deposit measure | Reported movement | Interpretation |
|---|---|---|
| Fresh domestic term deposits, May 2022–August 2024 | +243 basis points | Rates available to new depositors responded strongly over the cycle. |
| Outstanding domestic term deposits, May 2022–August 2024 | +190 basis points | Existing balances repriced differently from new bookings. |
| Outstanding deposits, H1 2024-25 through August 2024 | +4 basis points | A small increase during that specific period. |
| Fresh deposits, H1 2024-25 through August 2024 | −16 basis points | Fresh-deposit pricing moderated during that specific period. |
Questions to ask before moving money
- Is the quoted rate for a new deposit, a renewal or an existing balance?
- What is the exact tenure and maturity date?
- Are there different rates for senior citizens or specific customer categories?
- What is the premature-withdrawal rule and penalty?
- How often is savings interest calculated and credited?
- What are the applicable tax deductions and reporting obligations for your situation?
Compare the annualised rate, tenure, liquidity restrictions and renewal instruction together. Chasing a higher fresh-deposit rate can be unsuitable if you need the money before maturity.
Common misconceptions, corrected
“RBI lends to me at the repo rate.”
No. RBI lends under repo operations to eligible banks. Your lender then offers a loan under its own agreement, benchmark and spread.
“Every EMI changes immediately after an MPC decision.”
No. The benchmark, reset date, spread and repayment method determine when and how a covered floating-rate loan changes.
“A 25-basis-point repo cut means my loan rate falls 25 basis points.”
Only if the contract uses that benchmark, the full movement is passed through at reset, and no contractual feature changes the outcome. The historical RBI data show that aggregate pass-through has not been one-for-one.
“The reverse-repo rate is what my bank pays me on savings.”
No. Your deposit rate is set by your bank and governed by your account or deposit terms. Reverse repo is an RBI-bank liquidity operation.
“The fixed reverse repo is always the LAF floor.”
No. Since April 2022, SDF is the lower bound of the LAF corridor. Fixed-rate reverse-repo operations can still be used at RBI’s discretion.
A practical checklist for borrowers and savers
If you have a floating-rate loan
- Locate the benchmark and spread in the sanction letter or latest statement.
- Record the reset frequency and next reset date.
- After a policy move, obtain the lender’s effective rate and amortisation calculation.
- Check whether the adjustment changed EMI, tenor or both.
- Compare the revised schedule with your principal balance and contractual terms.
- Consider a part-prepayment or tenure/EMI option only after checking charges, liquidity needs and the lender’s rules.
If you are choosing a deposit
- Separate the rate for a fresh booking from the rate on an existing deposit.
- Match the tenure to when you will need the money.
- Read premature-closure, auto-renewal and interest-crediting conditions.
- Compare the post-tax outcome and not just the headline annual rate.
- Keep a record of the maturity date and renewal instruction.
The bottom line
Repo and reverse repo describe opposite RBI-bank liquidity flows. Repo is the policy rate and can influence a covered floating-rate loan through its benchmark and contractual reset. Reverse repo is not a household savings rate, and the fixed reverse repo is no longer the routine LAF corridor floor; SDF holds that position. Use the dated RBI rate table for the latest policy settings, then use your own loan agreement or deposit terms to determine the effect on your money.
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