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Repo Rate

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Repo Rate

Repo rate, also known as the repurchase rate, is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. It is a monetary policy instrument which can be used by the Reserve Bank of India (RBI) to control inflation and propel growth. When the repo rate increases, borrowing from the RBI becomes more expensive. On the other hand, when the repo rate is reduced, the cost of borrowing from the RBI becomes cheaper.

History of Repo Rate

The concept of repo rate was first introduced in India in the year 1992. It was introduced as part of the monetary policy reforms initiated by the then Finance Minister, Dr. Manmohan Singh. The objective of introducing the repo rate was to enable the RBI to control the money supply in the economy and thus, regulate inflation. Since then, the RBI has been using the repo rate as a tool to manage liquidity in the economy.

The repo rate has been revised several times over the years. In the year 2000, the repo rate was reduced from 6.5% to 6.25%. In the year 2004, the repo rate was increased to 6.75%. In the year 2010, the repo rate was increased to 8.5%. In the year 2013, the repo rate was reduced to 7.25%. In the year 2018, the repo rate was increased to 6.5%.

Comparison Table

Year Repo Rate
2000 6.5%
2004 6.75%
2010 8.5%
2013 7.25%
2018 6.5%

Summary

Repo rate is an important monetary policy instrument used by the RBI to control inflation and propel growth. It is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. The concept of repo rate was first introduced in India in the year 1992. Since then, the RBI has been using the repo rate as a tool to manage liquidity in the economy. For more information about repo rate, you can visit the websites of the RBI, the Ministry of Finance, and the World Bank.

See Also

  • Reverse Repo Rate
  • Cash Reserve Ratio
  • Statutory Liquidity Ratio
  • Marginal Standing Facility
  • Bank Rate
  • Monetary Policy
  • Liquidity Adjustment Facility
  • Open Market Operations
  • Base Rate
  • Marginal Cost of Funds Based Lending Rate

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