RBI's Monetary Policy Rates
Overview: RBI's Monetary Policy in India
The Reserve Bank of India (RBI) uses various monetary policy rates to regulate liquidity, control inflation, and influence economic growth. These rates, including the repo rate, reverse repo rate, bank rate, MSF, and SDF, influence borrowing, lending activities, and overall financial stability. Additionally, the RBI focuses on liquidity management, demonstrating the comprehensive approach to overseeing India’s financial health.
The RBI recently introduced changes to monetary policy rates, implementing them in response to India’s current economic conditions.
RBI's Monetary Policies Rate Chart
Latest Update: RBI's Monetary Policy
- Repo Rate at 6.25% (Reduced by 25 bps in February 2025) The repo rate is the rate at which RBI lends money to commercial banks. A decrease in this rate makes borrowing cheaper, encouraging economic growth. The recent cut marks the first reduction since May 2020, aiming to support economic expansion amid global trade uncertainties.
- Reverse Repo Rate (RRR) – 3.35% (Unchanged) The reverse repo rate is the rate at which RBI borrows money from banks. It plays a crucial role in absorbing excess liquidity from the banking system. While the repo rate was reduced, the RRR remains unchanged, ensuring controlled liquidity management.
- Marginal Standing Facility (MSF) Rate at 6.50% (Reduced by 25 bps in February 2025). The MSF rate is the emergency borrowing rate at which banks can access funds from the RBI overnight when facing liquidity shortages. The recent reduction aims to ease short-term borrowing costs for banks, ensuring sufficient liquidity in the financial system.
- Standing Deposit Facility (SDF) Rate at 6.00% (Reduced by 25 bps in February 2025). The SDF rate is the interest rate at which banks can park excess funds with the RBI without requiring collateral. The recent reduction is aimed at managing liquidity conditions by discouraging excessive deposits with the central bank.
- Bank Rate – 6.50% (Reduced by 25 bps in February 2025). The bank rate is the rate at which the RBI lends to commercial banks for long-term borrowing. A reduction in this rate lowers the cost of funds for banks, enabling them to offer more affordable credit to businesses and consumers.
- Cash Reserve Ratio (CRR) – 4.00% (Unchanged in February 2025). The CRR is the percentage of a bank’s total deposits that must be maintained with the RBI as reserves. Keeping the CRR unchanged ensures stability in the banking system while maintaining sufficient liquidity.
- Statutory Liquidity Ratio (SLR) – 18.00% (Unchanged in February 2025) The SLR is the minimum percentage of a bank’s net demand and time liabilities (NDTL) that must be held in liquid assets such as cash, gold, or government-approved securities. Keeping the SLR unchanged ensures financial stability while allowing banks to maintain adequate liquidity for lending.
RBI Monetary Policies
| Effective Date | Indicator | Current | Previous | Last Change |
| Feb-25 | Repo Rate | 6.25 | 6.25 | Dec-24 |
| Feb-25 | Reverse Repo Rate | 3.35 | 3.35 | Dec-24 |
| Feb-25 | Standing Deposit Facility (SDF) Rate | 6.00 | 6.00 | Dec-24 |
| Feb-25 | Marginal Standing Facility (MSF) Rate | 6.50 | 6.50 | Dec-24 |
| Feb-25 | Bank Rate | 6.50 | 6.50 | Dec-24 |
| Feb-25 | Cash Reserve Ratio (CRR) | 4 | 4 | Dec-24 |
| Feb-25 | Statutory Liquidity Ratio (SLR) | 6.7 | 6.7 | Dec-24 |
FAQs on Monetary Policy Rates
What is the primary objective of the RBI's monetary policy?
The RBI’s monetary policy aims to manage liquidity within the financial system, control inflation to maintain price stability, and influence overall economic growth in India. There are various monetary policy rates and liquidity management tools that RBI use to achieve interconnected objectives, ensuring the financial health of the nation.
Which key monetary policy rates are mentioned in the sources?
The key monetary policy rates mentioned are the repo rate, reverse repo rate (RRR), bank rate, Marginal Standing Facility (MSF) rate, and the Standing Deposit Facility (SDF) rate. Apart from these, there are CRR and SLR also.
Why doesn’t RBI’s monetary policy always work quickly?
Even if RBI changes interest rates, banks don’t immediately pass the changes to customers. Some reasons include:
- Banks already have enough money and don’t need RBI’s funds.
- Fixed deposits and small savings schemes have fixed interest rates.
- Banks try to keep profits high, so they don’t lower loan rates quickly.
- India’s corporate bond market is small, so businesses rely more on bank loans.
What causes inflation and how does RBI control it?
There are two main types of inflation:
- Demand-pull inflation – Too much money, not enough goods. (RBI reduces money supply to fix this).
- Supply-side inflation – Shortage of goods (e.g., fuel price hikes). (RBI can’t fix this directly; the government must take action).