Repo rate, also known as the short-term lending rate, is the rate at which the central bank- Reserve Bank of India (RBI)- lends money to other banks of the country.

It affects you and your finances as it has a direct impact on your home loan rates. Banks usually cut their interest rates, after the RBI cuts repo rate. In contrast, when the RBI hikes repo rate, banks, too, increase their interest rates.

Thus, home owners are particularly interested in RBI’s monetary policies as they get an idea as to whether their home loan interest rate will increase or decrease.

In recent times, the RBI in its bi-monthly policy hiked repo rate by 25 basis points, or 0.25%, thus taking the repo rate to 6.25%.

It is worth noting that though the RBI has cut repo rates multiple times in the past, banks have not transmitted the same to their customers.