The repo rate is the RBI’s main tool for steering interest rates in the economy. When the RBI raises it, borrowing becomes costlier for banks, and they pass this on through higher loan rates. When it cuts the rate, loans usually become cheaper.
Most new floating-rate home and personal loans are linked directly to the repo rate, so a change shows up in your EMI within a few months. Fixed deposit rates usually follow, with a lag. The Monetary Policy Committee decides the repo rate at its policy meetings, held roughly every two months.
