Insights On The Current Repo Rate Change In 2022

The Reserve Bank of India (RBI) is the central bank of India that controls the monetary policy of the Indian currency. On 8th June 2022, the repo rate increased from 4.40% to 4.90%. The main goal behind this is to make inflation stable and maintain monetary stability.

When we face a financial crisis we approach the banks. Similarly, banks approach the Reserve Bank of India (RBI) if they face a financial crisis.

What Is Repo Rate?

Repo rate is the rate at which the Central Bank of India i.e RBI lends money to commercial banks to balance the liquidity and fulfill the requirements of businesses.

The RBI repo rate is the most important policy interest rate in India. From time to time as part of the monetary policy review RBI reviews the repo rate.

From the Central Bank of India Banks borrow money with a legal agreement. And the rate of interest charged by RBI is called the Repo Rate.

Here is the history of Repo Rate changes until now. Have a quick look at it from the below table.

How does RBI calculate the Repo Rate?

As mentioned above, RBI calculates the Repo Rate based on the inflation of the market of the country. 

Difference Between Reverse Repo Rate and Repo Rate

The Repo rate is the Rate at which the Central Bank lends money from the commercial banks against government securities. While Reverse Repo Rate is the rate of interest given by the Central Bank to the commercial banks that deposit funds in the RBI treasury.