Current RBI Bank Interest Rates 2023

RBI Interest Rate

Reserve Bank of India (RBI), the central banking institution of India controls the monetary policy of the Indian currency. The key repo rate has been hiked on 7 December 2022 by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) by 35 basis point to 6.25%. The policy repo rate was increased from 4.00% to 4.40%, by 40 basis points (bps), on 4 May 2022, and then from 4.40% to 4.90% on 8 June 2022, by 50 basis points.

The rate was again increased on 8 August from 4.90% to 5.40%, by 50 basis points. On 30 September 2022, the report rate was increased by 50 basis points from 5.40% to 5.90%.

However, the reverse repo rate remains the same at 3.35%.

Some of the major functions of RBI include supervising banks and financial institutions, managing exchange rates, acting as banker’s bank, controlling inflation, maintaining deflation level and detect fake currency. From time to time, RBI controls liquidity and money supply in the market and thereby ensures overall economic growth.

Types of Interest rates fixed by RBI

  • Repo Rate: We all approach banks when we face a financial shortfall. Likewise, banks approach the Central Bank, which is the Reserve Bank of India in our country, if they face a financial crisis. Repo Rate or repurchase rate is the rate at which the RBI lends funds to commercial banks and other financial institutions within the country.

Simply put, banks borrow funds from the Central Bank of India by selling government securities with a legal agreement to repurchase the securities sold on a given date at a predetermined price. The rate of interest charged by RBI while they repurchase the securities is called Repo Rate. The current Repo Rate as fixed by the RBI is 5.90%. The latest revision in the rates was made to mitigate the economic risks keeping the deteriorating economic situation in view.

After the latest hike in the repo rate on 7 December 2022, the Marginal Standing Facility (MSF) Rate rose to 6.15% from 5.65% and currently stands at 6.50%. The Cash Reserve Ratio (CRR) had also been increased to 4.50% (an increase of 50 basis points) and currently remains unchanged.

History of Changes to Repo Rate

Here’s a snapshot of all the repo rate changes that have occurred since October 2005:

Updated On Repo Rate
7 December 2022 6.25%
30 September 2022 5.90%
8 August 2022 5.40%
8 June 2022 4.90%
4 May 2022 4.40%
22 May 2020 4.00%
27 March 2020 4.40%
04 October, 2019 5.15%
07 August, 2019 5.40%
06 June, 2019 5.75%
04 April, 2019 6%
07 February, 2019 6.25%
01 August, 2018 6.50%
06 June, 2018 6.25%
07 February, 2018 6.00%
02 August, 2017 6.00%
04 October, 2016 6.25%
05 April, 2016 6.50%
29 September, 2015 6.75%
02 June, 2015 7.25%
04 March, 2015 7.50%
15 January, 2015 7.75%
28 January, 2014 8.00%
29 October, 2013 7.75%
20 September, 2013 7.50%
03 May, 2013 7.25%
17 March, 2011 6.75%
25 January, 2011 6.50%
02 November, 2010 6.25%
16 September, 2010 6.00%
27 July, 2010 5.75%
02 July, 2010 5.50%
20 April, 2010 5.25%
19 March, 2010 5.00%
21 April, 2009 4.75%
05 March, 2009 5.00%
05 January, 2009 5.50%
08 December, 2008 6.50%
03 November, 2008 7.50%
20 October, 2008 8.00%
30 July, 2008 9.00%
25 June, 2008 8.50%
12 June, 2008 8.00%
30 March, 2007 7.75%
31 January, 2007 7.50%
30 October, 2006 7.25%
25 July, 2006 7.00%
24 January, 2006 6.50%
26 October, 2005 6.25%
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  • Reverse Repo Rate: When Reserve Bank of India faces a financial crunch, they invite commercial banks and other financial institutions to deposit their excess funds into RBI treasury and offers them excellent interest rates. Similarly, when banks have excess funds, they voluntarily transfer it to RBI as their money is safe and secure with them. Generally, Reverse Repo Rate is always lesser than Repo Rate.

  • Marginal Standing Facility Rate (MSF): When banks face acute financial shortage, they can avail this special facility offered by RBI. In MSF, banks can borrow cash from RBI against their approved government securities. This option is preferred during emergency and critical situations only. MSF rate is always higher than Repo Rate as banks need the funds instantly. The Marginal Standing Facility rate currently stands at 6.50%.
  • Bank Rate: Bank Rate is the rate of interest charged by The Central Bank of India against loans offered to commercial banks. Bank rate is usually higher than repo rate. Unlike repo rate, bank rate directly affects the end user, in this case the customer, as high bank rates mean high lending rates.
  • When banks pay high interest rates to obtain loans from RBI, they in return charge the customer a high interest rate to break even. Also known as “Discount Rate”, bank rate is a powerful tool used by the RBI to control liquidity and money supply in the market. The current Bank Rate is the same as Marginal Standing Facility rate, i.e., 6.50%.

  • Cash Reserve Ratio (CRR): In India, banks are required to retain a certain percentage of their deposits as liquid cash. However, banks prefer to deposit this liquid cash with the Reserve Bank of India, which is equivalent to having cash in hand. The percentage of the deposits that should be kept aside by banks is called Cash Reserve Ratio. CRR is fixed by The Reserve Bank of India. For example: If the bank deposit amount is Rs.100 and the CRR is 10% p.a., the liquid cash that the bank should have at all times is Rs.10. The remaining funds, which is Rs.90 in this case can be used for lending and investment purposes. RBI has the power to determine the lending capacity of the banks in India through CRR. They will increase CRR if they want to reduce the amount that the banks can lend and vice versa. The current CRR is 4.50%
  • Statutory Liquidity Ratio (SLR): At the end of every business day, banks are required to maintain a minimum ratio of their Time liabilities (when the bank has to wait to redeem their liabilities) and Net Demand (when bank can withdraw money from these accounts immediately) in the form of liquid assets like gold, cash and government securities. The ratio of time liabilities and liquid assets in demand is called Statutory Liquidity Ratio or SLR. The maximum SLR that The Reserve Bank of India can set is 40% p.a. However, the current SLR is set at 18.00% p.a.
  • Base Rate: The Reserve Bank of India sets a minimum rate below which banks in India are not allowed to lend to their customers. This minimum rate is called the Base Rate in banking terms. It is the minimum rate of interest the banks are permitted to charge their customers. The new Base Rate as fixed by RBI is in the range of 7.75% - 8.80% p.a.
  • Marginal Cost of Funds based Lending Rate (MCLR): RBI made changes to the existing Base Rate system this year. They have introduced Marginal Cost of Funds based Lending Rate or MCLR which is a new methodology to set the lending rates for commercial banks.
  • Previously, banks used to lend as per the Base Rate fixed by The Reserve Bank of India but with the introduction of MCLR, banks will have to lend using rates linked to their funding costs.

    Simply put, banks raise their funds through deposits, bonds and other investments. For the banks to function smoothly, there are costs involved like salaries, rents and other bills. Considering that banks also need to make profits every year, RBI has included the expenses of the bank and have come up with a formula which can be used by banks to determine their lending rate. With the reduction of repo rate, some banks have reduced MCLR up to 90 basis points. The current MCLR (overnight) fixed by the RBI stands in the range of 6.80% to 7.65%.

  • Savings Deposit Rate:The interest rate earned by an account holder for the amount maintained in their savings account is called savings deposit rate. The current Savings Deposit Rate as set by the RBI is in the range of 2.70% to 3.00%.
  • Term Deposit Rate: Customers who deposit money into their account and agree to fix it till a particular date are awarded with the term deposit rate. The term deposit rate for senior citizens is usually 0.5% more than that for ordinary citizens. The interest rate of Term Deposits that the Reserve Bank of India has set ranges from 5.30% to 5.75% (for less than one year).
  • Call Rate: It is the interest rate paid by the banks for lending and borrowing funds for a maturity period of 1 to 14 days. Call Rate is also known as the interbank borrowing rate. It deals with short-term lending between banks. The Call Rate set by the RBI as on 22 May 2020 is in the range of 3.80% to 5.35%.

In conclusion, policy rates are subjected to change without any warning as RBI constantly monitors the supply of money in the economy and takes decisions accordingly.

FAQs on Current RBI Bank Interest Rates

  1. Does the Reserve Bank of India (RBI) allow the banks to accept deposits which are free of interest?
  2. No, banks are not allowed to accept deposits that are interest free. This is, however, not applicable to current accounts. The banks can accept interest-free deposits for current accounts.

  3. Do the rate of interest stipulations which apply to the loans (in Indian Rupees under the FCNR (B) schemes are also applicable to the loans avail in foreign currency?
  4. No, the rate of interest stipulations which apply to the loans (in Indian Rupees under the FCNR (B) schemes are also applicable to the loans avail in foreign currency. It is governed by the Foreign Exchange Department of the RBI.

  5. Does the Reserve Bank of India (RBI) allow the banks to extend loans and advances to their customers below the Base Rate set by the central bank?
  6. No, banks and other lending institutions are not allowed to extend loans and advances to their customers under the Base Rate set by the Reserve Bank of India (RBI). Base Rate is the minimum rate for all types of loans and advances.

News About RBI Bank Interest rates

  • Repo rate raised by 35 basis points

    On 7 December, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) raised the repo rate by 35 basis points to 6.25% effective immediately. This is RBI’s fifth rate increase this fiscal year. Since August 2018, the policy rate of the RBI is presently at its highest.

    7 December 2022

  • RBI has increased repo rate by 50 bps

    Following the completion of the Monetary Policy Committee (MPC) meeting on 8 June 2022, the Reserve Bank of India (RBI) increased the policy repo rate by 50 basis points (bps) to 4.90%. The MPC agreed unanimously to hike the repo rate and modify the policy stance to one of gradual withdrawal of accommodation. The Marginal Standing Facility and Standing Deposit Facility rates have also been hiked by 50 bps and now stand at 5.15% and 4.65%, respectively.

    9 June 2022

  • The RBI governor raises the repo rate by 40 basis points at an emergency meeting

    In an unscheduled news conference on Wednesday, RBI Governor Shaktikanta Das revealed that the Monetary Policy Committee (MPC) unanimously decided to hike rates in an off-cycle meeting. The policy repo rate has been hiked by 40 basis points to 4.40 percent with immediate effect.

    6 May 2022

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