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Repo Rate Explained — Prelims + Mains

What the repo rate is, why transmission lags, and the exact points the exam tends to ask.

OOneOS DeskJun 26, 2026 7 min read 2 sources

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The RBI's latest policy review changed the repo rate, with direct exam relevance.

The repo rate is the rate at which the RBI lends to commercial banks. It is the headline tool of monetary policy.

What is the Repo Rate?

When the RBI cuts the repo rate, borrowing becomes cheaper and liquidity expands.

Banks do not always pass on rate changes immediately — this is the transmission lag.

Expect Prelims to test definitions and Mains to reward analysis of transmission and inflation targeting.

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