Bank Rate Vs Repo Rate in India: Check Current Bank Rate and Repo Rate, Meaning, and Differentiation Details

Q: What is the current repo rate of the RBI in India?

The current repo rate of the RBI is 5.50 %.

Sep 13 2025

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Dear aspirants, in the Indian banking system, monetary policy tools play a vital role in regulating liquidity, inflation, and overall economic stability. Two of the most important instruments used by the Reserve Bank of India (RBI) are the Bank Rate and the Repo Rate. Bank Rate is the rate that the Reserve Bank of India (RBI) provides loans to commercial banks. It is an important tool to control the supply of money in the economy and manage inflation. The bank rate is the interest rate at which the nation's central bank lends money to domestic banks. The Repo rate, or Repurchase rate, is the rate at which the RBI lends short-term money to commercial banks against securities. The Repo Rate is a critical tool for managing short-term liquidity in the banking system. While both rates influence lending, borrowing, and the flow of money in the economy, they differ in purpose and impact. This article explains the details of the Bank Rate, Including Its Current Value, what it is in India, and the difference between the Bank Rate and the Repo Rate. For any queries, check the FAQ section listed below.

New Repo Rate of RBI 2025

RBI has announced its latest Monetary Policy on 6th of June 2025, following the 55th meeting of its Monetary Policy Committee over 4th-6th June 2025. Therefore, the current repo rate of the RBI is 5.50 %. The Repo Rate refers to the rate at which the RBI lends to banks against government securities, usually for short-term liquidity management.

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Bank Rate Meaning

Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as "the standard rate at which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under the Act." The Bank Rate is the rate at which the RBI lends money to commercial banks without any collateral, typically for long-term requirements, and it directly affects lending rates in the economy. The Reserve Bank of India (RBI) lends money to commercial banks at the "bank rate", at which it does not hold any collateral. No repurchase agreement will be drafted or agreed to without any form of collateral. Short-term loans with collateral are permitted by the RBI. Repo Rate is the term for this. The RBI sets Indian banks' interest rates. Due to its capacity to control liquidity, it is typically greater than the Repo Rate.

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Current Bank Rate in India 2025

As per the latest Monetary Policy of the RBI, the current bank rate in India is 5.75 %. With that Monetary Policy update, there will be consequent adjustment of the Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) to 5.25 % and of the Marginal Standing Facility (MSF) rate and the Bank Rate to 5.75 %. Since the bank rate is a crucial instrument for controlling liquidity, it is typically higher than the repo rate. Bank Rate, also referred to as "Discount Rate," is frequently mistaken for Overnight Rate. The overnight rate is the interest rate charged when banks borrow money from one another, as opposed to the bank rate, which is the interest rate the central bank charges on loans given to commercial banks. When the RBI raises the bank rate, banks' borrowing costs rise as well, which decreases the amount of money available on the market. Presently, the maintenance of the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) only employs the bank rate to determine the penalty for default.

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How Bank Rate Is Determined?

A country's central bank, which regulates the banking industry and the amount of money in the economy, sets the interest rate. This is often carried out every three months to maintain the country's currency rates and limit inflation. A country's economy is affected by a bank rate change in a cascade of ways that affect all areas of the economy. For instance, changes in interest rates cause changes in stock market prices. Customers are impacted by changes in bank rates since they affect the rates at which they can obtain loans.

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Difference between Bank Rate and Repo Rate

Even while the Bank Rate and Repo Rate are both set by the central bank and used to monitor and manage the market's cash flow, they also have some notable differences. In 2025, understanding the distinction between these two rates is crucial for candidates preparing for competitive exams and for anyone analysing India’s monetary policy framework.

Diff. between Bank Rate and Repo Rate
Bank Rate	Repo Rate
Loans given by the central bank to commercial banks are subject to bank rates.	Repurchasing securities that commercial banks have sold to the central bank is subject to a repo rate.
Bank Rate is charged without using any collateral.	When the Repo Rate is levied, securities, bonds, agreements, and collateral are involved.
Repo rates are always lower than the bank rates.	Due to its capacity to control liquidity, it is typically greater than the Repo Rate.
An increase in the bank rate has a direct impact on the interest rates offered to customers, which limits their ability to get loans and harms overall economic growth.	The banks typically handle Repo Rate increases, so clients are not immediately impacted.
The long-term financial needs of commercial banks are met by the Bank Rate.	Repo Rate emphasises short-term financial needs.