---
title: "Repo Rate Definition and Importance | Model Diplomat"
description: "The repo rate is the interest rate at which the Reserve Bank of India lends to banks. It's crucial for understanding India's monetary policy and liquidity."
url: "https://modeldiplomat.com/learn/glossary/repo-rate"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The repo rate is the interest rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities under a repurchase agreement.
- Who decides the repo rate in India?
- How does the repo rate differ from the reverse repo rate?
- What is the inflation target that guides the repo rate?
- What is the difference between the repo rate and the CRR?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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In May 2022, India's Monetary Policy Committee under Governor Shaktikanta Das raised the repo rate by 40 basis points in an off-cycle meeting to combat surging CPI inflation, beginning a tightening cycle that lifted the rate to 6.50 per cent by February 2023.

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