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Repo Rate

Many individuals might have come across the term repo rate in banking but they might be unaware of the meaning and other details of a repo rate. The repo rate is basically an interest rate that is charged by the central bank of a country on the loans borrowed by commercial banks. The Reserve Bank of India is the apex banking institution that regulates the repo rate. Repo denotes a repurchase option or an agreement that is used as a tool in the financial market. On the other hand, if the commercial banks borrow a loan from RBI then they have to keep collateral with the RBI and then only they get a loan. So, you must see all the details that are related to Repo Rate.

Repo Rate Working

If any commercial bank falls short of funds then it borrows it from RBI that is the lender of the last resort. But the RBI charges a certain rate of interest on that loan for a specified tenure and that rate of interest is known as the repo rate.

Collateral for Loan from RBI

The RBI also keeps collateral before giving loans to commercial banks. So, you must go through the collaterals a bank keeps when it borrows a loan from RBI:-

  • Government Bonds
  • Treasury Bills
  • Equity
  • Mortgage-Backed Securities
  • Asset-Backed Securities
  • Money Market Securities
  • Gold
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Prevailing Repo Rate

The current repo rate in India is 4% and it is the lowest since 2014. You must go through the repo rate in the last 8 years charged by the Reserve Bank of India.

DatesRepo RateDatesRepo Rate
28th January 20148%7th February 20196.25%
15th January 20157.75%4th April 20196%
4th March 20157.50%6th June 20195.75%
2nd June 20157.25%7th August 20195.40%
29th September 20156.75%10th October 20195.15%
5th April 20166.50%5th December 20195.15%
4th October 20166.25%6th February 20205.15%
2nd August 20176%27th March 20204.40%
6th June 20186.25%22nd May 20204%
1st August 20186.50%6th August 20204%

How Repo Rate Affect Home Loan Interest Rate?

You know that repo rate is the interest RBI charges on loans that it gives to the commercial banks. But if the RBI increases the repo rate then the commercial banks will have to pay a high rate of interest to RBI. As a result, the commercial banks increase the interest on home loans and recover it from the customers. Therefore, if the RBI increases the Repo Rate, the home loan interest rates will also increase.

Who Decides Repo Rate?

The Monetary Policy Council decides the Repo Rate and the Governor of the Reserve Bank of India heads this council.

Conclusion

We have told you the meaning and working of repo rate and now you have understood how it affects the interest rate of home loans. You must also go through the prevailing repo rate charged by the Reserve Bank of India to commercial banks. The rates on the deposits also get affected by the charge in the Repo Rate. So, you must know all about Repo Rate before you borrow a home loan or have any kind of deposit with the bank.

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Covered For Life
Personal Loan Interest Rates January 2022
Fullerton India14.00% - 24.00%
HDFC Bank10.25% - 17.00%
ICICI Bank10.50% - 17.50%
IndusInd Bank11.00% - 23.00%
Kotak Bank10.75%
RBL17.50% - 26.00%
Standard Chartered Bank11.00% - 12.50%
Tata Capital10.49% - 14.25%
Home Loan Interest Rates January 2022
Axis Bank6.75% - 7.20%
Bank of Baroda6.75% - 8.25%
Citibank6.65% - 7.40%
HDFC6.70% - 8.00%
ICICI Bank6.70% - 7.55%
Indiabulls Housing Finance Limited8.65%
Kotak Bank6.55% - 7.10%
LIC Housing6.66% - 7.90%
Piramal Capital & Housing Finance10.50%
PNB Housing Finance6.99% - 8.90%
Reliance Home Finance8.75% - 14.00%
State Bank of India/SBI6.70% - 6.90%
Tata Capital6.90% - 8.75%