By BillCut
Last updated: 22 October 2026
The repo rate is the interest rate at which the Reserve Bank of India lends money to banks for short periods, against government securities. When the repo rate goes up, borrowing tends to get costlier for everyone, including you. As of 22 October 2026, the repo rate is 5.50%.
What is repo rate in simple words?
Think of the Reserve Bank of India as a bank for banks. When a bank needs money for a short time, it can borrow from the RBI by pledging government securities and agreeing to buy them back later. The interest it pays on that borrowing is the repo rate.
The RBI’s monetary policy overview defines the repo rate as the interest rate at which it provides liquidity to banks under its liquidity adjustment facility, against government and other approved securities.
“Repo” is short for repurchase agreement, because the bank sells securities and agrees to repurchase them.
Repo rate, SDF and MSF: what is the difference?
The repo rate sits in the middle of a small band of RBI rates. As of the Reserve Bank of India’s October 2026 policy decision, they stand at:
| Rate | What it is | Level from 7 October 2026 |
|---|---|---|
| Repo rate | The rate at which the RBI lends to banks | 5.50% |
| Standing deposit facility (SDF) rate | The rate the RBI pays when banks park spare money with it overnight | 5.25% |
| Marginal standing facility (MSF) rate | A higher, penal rate for emergency overnight borrowing | 5.75% |
You may still see “reverse repo rate” in older articles. The SDF rate now sets the lower end of the band.
Who decides the repo rate, and why does it change?
A six-member Monetary Policy Committee decides the repo rate, usually at meetings held every two months. Its main goal is price stability: keeping CPI inflation close to a 4% target, within a band of 2% to 6%, while keeping growth in mind. The RBI’s monetary policy framework sets out this target.
| If the RBI expects | It may | What borrowers usually see |
|---|---|---|
| Inflation rising above target | Raise the repo rate | Loan rates and EMIs rise |
| Inflation steady and growth on track | Hold the repo rate | Little change |
| Inflation low and growth weak | Cut the repo rate | Loan rates and EMIs fall |
In October 2026, the RBI raised the repo rate from 5.25% to 5.50% because it expected inflation to average 5.2% for 2026-27.
How does the repo rate affect your loan?
For banks, new floating rate personal and retail loans, including home and auto loans, have been linked to an external benchmark since 1 October 2019, and the repo rate is one of the allowed benchmarks, under the Reserve Bank of India’s external benchmark lending rules. Such a loan’s rate is the benchmark plus a spread, and it must be reset at least once in three months.
Here is how that works in an illustrative repo-linked home loan:
| Illustrative item | Before the hike | After the hike |
|---|---|---|
| Repo rate | 5.25% | 5.50% |
| Lender’s spread | 3.75% | 3.75% |
| Your loan rate | 9.00% | 9.25% |
| EMI on Rs 30 lakh with 20 years left | Rs 26,992 | Rs 27,476 |
The spread stays the same in this example, so the full 0.25 point rise passes to the borrower: about Rs 484 a month more. Fixed rate loans do not change when the repo rate moves. If a floating rate on an EMI-based personal loan does change, the Reserve Bank of India’s rules on resetting floating interest rates require the lender to tell you and let you choose between a higher EMI and a longer tenure. BillCut explains how banks build a home loan rate in how banks decide home loan interest rates.
Your loan’s true yearly cost also includes fees, which is why lenders now show an annual percentage rate, or APR. See why borrowers misread APR.
If rising rates are stretching several EMIs at once, it may be worth checking whether one structured EMI would cost less in total. Check your options with BillCut.
How BillCut can help
BillCut is a balance transfer and debt reduction platform. It works with lending partners to help eligible borrowers move high interest dues, such as credit card balances and personal loan EMIs, into one structured EMI. BillCut earns from helping borrowers refinance, so it has an interest in this option, and approval and terms depend on the partner lender. For more on what rate resets can do to a home loan, see floating rate shocks on home loans.
Frequently asked questions
What is repo rate in simple words?
It is the interest rate the Reserve Bank of India charges banks when it lends them money for short periods against government securities.
What is the repo rate today?
The repo rate is 5.50% from 7 October 2026.
What is the full form of repo?
Repo stands for repurchase agreement, because a bank sells securities to the RBI and agrees to buy them back.
What is the difference between repo rate and SDF rate?
The repo rate is what banks pay to borrow from the RBI, while the SDF rate is what the RBI pays banks for parking spare money with it overnight.
Who decides the repo rate?
A six-member Monetary Policy Committee decides it, with the aim of keeping CPI inflation close to a 4% target.
How does the repo rate affect my loan?
If your floating rate loan is linked to the repo rate, your rate rises or falls with it at the next reset. Fixed rate loans do not change.
Is a higher repo rate good or bad for borrowers?
A higher repo rate usually makes floating rate loans and new loans costlier, so it is generally bad for borrowers in the short term.
This article is for general information only and is not financial advice. Rates change, and the loan figures above are illustrative. Check your loan documents and speak to your lender or a qualified professional before making decisions.
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