Updated RBI Interest Rate 2018

India's central banking system, the Reserve Bank of India regulates the monetary policy of the Indian economy. RBI was founded on 01 April 1935, for solving economic crises after the First World War. Significant functions of RBI include overseeing banks and financial institutions, managing exchange rates, serve as banker's bank, controlling inflation and deflation in the country and identifying fake currency. From time to time, RBI regulates the liquidity and money supply in the market thereby ensuring overall economic growth.

Types of Interest rates fixed by RBI

Repo Rate

We all approach banks while facing financial emergencies. Likewise, banks approach the Central Bank of the country, when they face a financial crisis. Repo Rate or Repurchase Rate is the rate at which the RBI advances funds to commercial banks and other financial institutions of the country. Otherwise stated, banks borrow funds from the Central Bank by selling government securities and bonds with a legal agreement to repurchase the securities and bonds traded on a predefined date at a predetermined price. The rate of interest imposed by RBI while the banks repurchase the securities or bonds is called Repo Rate. The current Repo Rate set by the RBI is 6.5% per annum.

According to the bi-monthly monetary policy statement, RBI has raised the repo rate by 25 basis points. This is the second increase in the repo rate this year. The reverse repo-rate has also increased by 25 basis points, i.e., from 6% to 6.25% and the Marginal Standing Facility Rate (MSF) and the Bank Rate have been raised to 6.75%.

History of Changes to Repo Rate

The Reserve Bank of India had increased the Repo Rate from 6% to 6.25% per annum on 6th June 2018. The second rise in the repo rate in a single year was the first time in more than four years. Last time the repo rate was raised was in January 2014. The RBI increased the Repo Rate again on the 1st August 2018 by 25 basis points, from 6.25% to 6.50%. Even the reverse repo-rate was increased from 6% to 6.25%, and the Marginal Standing Facility Rate(MSF) went up by 25 basis points, from 6.5% to 6.75%. The change in repo-rate also affects change in all the other types of rates that are fixed by the RBI and private banks.

Here's a list of all the repo rate changes that have happened since October 2005: