Almost every banking exam asks at least one question on RBI’s policy rates. The trick is to know not just the numbers but what each rate does. This guide explains all seven in plain words, gives the current values and ends with a 10-question quiz.
Current rates at a glance
| Rate / ratio | Current value | Who decides |
|---|---|---|
| Repo rate | 5.50% | Monetary Policy Committee (MPC) |
| Standing Deposit Facility (SDF) | 5.25% (repo − 0.25%) | Linked to repo |
| Marginal Standing Facility (MSF) | 5.75% (repo + 0.25%) | Linked to repo |
| Bank rate | 5.75% (same as MSF) | RBI |
| Fixed reverse repo | 3.35% | RBI |
| Cash Reserve Ratio (CRR) | 3.00% of NDTL | RBI |
| Statutory Liquidity Ratio (SLR) | 18.00% of NDTL | RBI |
Values as per the MPC meeting of October 2026, when the repo rate was raised by 25 basis points to 5.50%. Check the latest MPC statement before your exam, as rates change every two months.
The policy corridor (LAF)
RBI manages day-to-day money in the banking system through the Liquidity Adjustment Facility (LAF). Think of it as a corridor:
| Corridor | Rate | Meaning |
|---|---|---|
| Ceiling | MSF (5.75%) | Highest rate at which banks can borrow overnight from RBI |
| Policy rate | Repo (5.50%) | The main signal of RBI’s stance |
| Floor | SDF (5.25%) | Rate RBI pays banks for parking surplus money, without collateral |
The width of the corridor is 50 basis points (0.25% on each side of the repo rate).
Repo rate
- The rate at which RBI lends short-term money to banks against government securities as collateral.
- “Repo” means repurchase agreement: the bank sells securities to RBI and agrees to buy them back later.
- Higher repo → loans become costlier → demand and inflation cool down. Lower repo → loans get cheaper → growth is supported.
- It is the only rate decided by the MPC; SDF and MSF move with it automatically.
Reverse repo and SDF
- Reverse repo is the rate at which RBI borrows from banks (banks park money with RBI against securities).
- Since April 2022, the SDF replaced the reverse repo as the floor of the corridor. The key difference: SDF needs no collateral, so RBI is not limited by how many securities it holds.
- The fixed-rate reverse repo (3.35%) still exists but is used only at RBI’s discretion.
- SDF was enabled by an amendment to the RBI Act in 2018 (Section 17).
Marginal Standing Facility (MSF)
- An emergency window for banks to borrow overnight from RBI when other sources dry up.
- Banks can dip into their SLR holdings (up to 2% of NDTL) to borrow under MSF.
- Introduced in 2011; rate = repo + 0.25%.
Bank rate
- The rate at which RBI lends to banks without any repurchase agreement (long-term, no collateral transaction like repo).
- Today it is mainly used for penalties on banks that fail to maintain CRR/SLR. It is kept equal to the MSF rate.
Cash Reserve Ratio (CRR)
- The share of a bank’s Net Demand and Time Liabilities (NDTL) that it must keep as cash with RBI.
- Banks earn no interest on CRR balances.
- Governed by Section 42 of the RBI Act, 1934.
- RBI announced a 100 bps CRR cut (4% → 3%) in June 2025, done in four steps of 25 bps (Sep–Nov 2025). This released roughly ₹2.5 lakh crore (approx) into the banking system.
Statutory Liquidity Ratio (SLR)
- The share of NDTL that banks must keep in liquid assets: cash, gold, or approved government securities.
- Unlike CRR, banks keep SLR assets with themselves and earn interest on the securities.
- Governed by Section 24 of the Banking Regulation Act, 1949. The legal ceiling is 40%; there is no legal floor now.
- SLR has been 18% since April 2020.
CRR vs SLR: quick difference
| Point | CRR | SLR |
|---|---|---|
| Kept with | RBI | The bank itself |
| Form | Cash only | Cash, gold, approved securities |
| Interest earned | None | Yes (on securities) |
| Law | RBI Act, 1934 (Sec 42) | BR Act, 1949 (Sec 24) |
| Current | 3% | 18% |
How rates move together
| RBI wants to… | Typical action |
|---|---|
| Control high inflation | Raise repo (and corridor); may raise CRR |
| Boost growth | Cut repo; cut CRR to release liquidity |
| Add liquidity quickly | CRR cut, OMO purchases, VRR auctions |
| Absorb extra liquidity | VRRR auctions, OMO sales, higher SDF use |
Exam-ready one-liners
- Repo rate: 5.50% (October 2026, after a 25 bps hike).
- SDF = repo − 0.25% = 5.25%; it is the floor of the LAF corridor since April 2022.
- MSF = bank rate = repo + 0.25% = 5.75%.
- Fixed reverse repo: 3.35%.
- CRR: 3% of NDTL, kept as cash with RBI; earns no interest.
- SLR: 18% of NDTL; legal ceiling 40% under the BR Act.
- Only the repo rate is decided by the MPC.
- Banks can borrow under MSF by dipping into SLR up to 2% of NDTL.
Related reading
Quiz: test yourself
Loading the quiz…
Rates are as per RBI’s October 2026 policy as reported. Always check the latest MPC statement on rbi.org.in.
Get daily current affairs & job alerts freeJoin SyllabusBox for updates every day.