Everything You Need to Know About Deposits

Interest rates, particularly the RBI’s repo rate, remain a pivotal influence on the investment landscape, shaping liquidity conditions, borrowing costs, and the strategic decisions of investors navigating a complex macroeconomic environment

But how exactly do repo rate movements connect with floating rate funds? What should investors watch out for? And why are these funds often discussed during times of economic change? Let’s unpack all of this in a way that’s practical, easy to understand, and relevant to everyday investors like you.

As the RBI’s Monetary Policy Committee (MPC) convenes from June 4 to 6, 2025, the focus sharpens on the likely third consecutive repo rate cut this year. Following two 25 basis point reductions in February and April that brought the rate down from 6.50% to 6.00%, market expectations are high for another repo rate cut.

The Reserve Bank of India (RBI) wields considerable influence over the nation’s economic trajectory, with the repo rate serving as one of its most potent instruments. But how exactly does the RBI calibrate this seemingly simple interest rate to steer economic growth and manage inflation? The repo rate, which is the rate at which commercial banks borrow funds from the RBI against government securities, is far from arbitrary.

The relationship between the repo rate and corporate bond yields is crucial for investors, companies, and policymakers alike. In India, understanding this interplay is essential, especially given how rapidly economic conditions evolve. The repo rate, which is the rate at which commercial financial institutions borrow funds from the Reserve Bank of India (RBI), plays a vital role in shaping the broader debt market and influencing corporate bond yields.

In India, the Reserve Bank of India (RBI) governs the monetary policy and uses a bouquet of rates to maintain economic stability, control inflation, and influence liquidity in the financial system. And the three most critical interest rates that are pivotal to this monetary policy are the repo rate, bank rate and Marginal Standing Facility (MSF) rate.

Understanding their distinct roles and the nuances that set them apart from each other is necessary in making informed financial decisions.

The Reserve Bank of India (RBI) has already cut the repo rate twice this year—by 25 basis points each in February and April, bringing the key policy rate down from 6.50% to 6.00%. With the Monetary Policy Committee (MPC) scheduled to meet between June 4 and 6, market consensus strongly anticipates a similar cut, in order to rein in inflation and support the country’s economic growth. 

When economic turbulence strikes, the RBI steps in with tools like the repo rate. While banks feel the impact first, NBFCs are indirectly influenced as changes in market funding costs gradually shape their lending environment.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is crucial in guiding India's monetary policy. Established to improve transparency and accountability, the MPC sets key policy rates, like the repo rate.

The RBI repo rate is one of the most influential tools in India's economic toolkit, shaping everything from inflation rates to borrowing costs and consumer behaviour. Announced by the Reserve Bank of India (RBI) on a regular basis, the repo rate acts as a critical lever for managing liquidity and steering the country’s economic growth. But how often does the RBI make these announcements? What factors drive their decisions, and how do they impact markets, businesses, and individual consumers?

As the RBI’s Monetary Policy Committee (MPC) convenes this week, industry insiders are expecting a third consecutive repo rate cut of this year—most likely by 25 basis points, potentially lowering the rate to 5.75%. This follows two prior cuts earlier this year, in February and April, which brought the repo rate down from 6.50% to 6.00%. This sustained easing cycle is likely supported by a benign inflation outlook, with CPI inflation moderating to 3.2% in April, well within the RBI’s 4% target band.