Everything You Need to Know About Deposits

Recent headlines suggest slowing inflation and there is plenty to discuss about a likely Reserve Bank of India (RBI) rate cut. If you are considering investing in Fixed Deposits (FDs) when the interest rates are high, now is the time.

The Reserve Bank of India (RBI), on June 6, 2025, has once again lowered the repo rate, this time by 50 basis points. The repo rate now stands at 5.50%, marking a significant move in the country’s monetary policy. While this news brings relief to borrowers, making loans cheaper, a reduction in the repo rate can also impact investments. This is why it is essential for borrowers and investors to keep track of these changes to make informed financial decisions.

On that note, let’s take a closer look at how these decisions impact the economy in real terms.

Understanding the nuances of repo and reverse repo rates is essential for those who wish to grasp the finer points of monetary policy, especially when it comes to managing liquidity in the economy. These tools, employed by the Reserve Bank of India (RBI), play a vital role in influencing interest rates, market liquidity, and the overall economy. In this blog, we’ll explore the repo rate and reverse repo rate, how they impact liquidity management, and their roles in the broader economic framework.

For homebuyers and investors in India, the cost of borrowing is a key consideration when taking out a housing loan. While most people focus on interest rates, the underlying driver of these rates is the Reserve Bank of India's (RBI) repo rate. Changes in the repo rate are one of the most significant economic events that influence lending rates across the banking sector, including those for home loans.

The Reserve Bank of India (RBI) plays a pivotal role in managing inflation and guiding economic growth through its monetary policy tools. One of the most important tools among them is the repo rate. By lowering the cost at which banks borrow from the central bank, the RBI aims to encourage lending, stimulate investment, and boost consumption.

On June 6, 2025, the RBI reduced the repo rate by 50 basis points to 5.50%. This strategic move reflects the central bank’s switch to a more ‘neutral’ policy stance.

The Reserve Bank of India (RBI) holds significant influence over the Indian economy, particularly through its monetary policy decisions. Whether it’s controlling inflation, encouraging investment, or supporting growth, the RBI’s stance on interest rates can steer the economy in different directions. The RBI regularly adjusts its monetary policy to reflect the prevailing economic conditions, and the decisions made often lead to changes in the repo rate, which affects borrowing costs for individuals and businesses alike.

The repo rate and inflation targeting are central to India’s economic strategy, serving as key tools for the Reserve Bank of India (RBI) to manage inflation and keep the economy stable. Through its monetary policy, the RBI aims to keep inflation within a set target range to ensure price stability, which supports long-term growth. The link between the repo rate and inflation targeting is crucial: by changing the repo rate, the RBI influences borrowing costs, which affect demand for goods and services and, in turn, the overall inflation rate.

The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points to 5.50% in its June 2025 Monetary Policy Committee meeting. This marks the third consecutive reduction since February. The RBI has also shifted its policy stance from ‘accommodative’ to ‘neutral,’ reflecting a calibrated approach to balance growth and inflation. This move comes amid easing inflation pressures and aims to sustain economic momentum while addressing emerging global volatilities.

Following two successive 25 basis point cuts earlier this year, the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) slashed the repo rate by 50 basis points to 5.50% in its June 6 meeting.

A steeper cut than widely anticipated, this decision brings the cumulative easing to a substantial 100 basis points. This year. The MPC also lowered the cash reserve ratio (CRR) by 100 basis points in tranches starting September, injecting further liquidity into the system.

In today’s highly interconnected global economy, decisions made by central banks in one region can send ripples across borders, impacting financial systems worldwide. For India, the repo rate — a critical monetary policy tool used by the Reserve Bank of India (RBI) — is not an isolated decision.