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Web Special: What are policy rates?

SI Reporter / Mumbai 17 Apr 12 | 09:37 AM

The Reserve Bank of India will review the Monetary Policy today. Here is a ready reckoner that simplifies the policy jargon for you.

The rate of interest at which the Reserve Bank of India (RBI) lends money to other banks is called repo rate. At present, it stands at 6.75 per cent.

A cut in the repo rate is good news for banks, as they can borrow more at a low cost. If the central bank raises the repo rate, the cost of funds for banks go up. Consequently, banks may want to pass on the added costs to customers at lend at higher rates.

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