What is the Repo Rate? (Simple Explanation for UPSC)

• The Repo Rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks when they face a shortage of funds.

Why is it important?

• To control inflation: If inflation is high, RBI increases the repo rate to make borrowing costlier. This reduces spending and controls inflation.
• To boost growth: If the economy is slowing down, RBI decreases the repo rate to make borrowing cheaper. This encourages businesses and individuals to take loans and spend more, boosting economic growth.

Current Repo Rate (As of April 2025): 6.00%