Current · Source: Reserve Bank of India · RBI/2008-2009/103 · issued 29 Jul 2008 · ~1 min read
Quick answerRBI raised the repo rate from 8.5% to 9.0% effective July 30, 2008, while keeping the reverse repo rate unchanged at 6.0%. This move tightens liquidity and signals a hawkish stance to manage inflation.
The rule, in the simplest words
The RBI (Reserve Bank of India, the country's central bank) raised the repo rate (the interest rate at which banks borrow money from RBI) from 8.5% to 9.0% starting July 30, 2008.
The reverse repo rate (the interest rate RBI pays banks when they deposit money with RBI) stayed the same at 6.0%.
This makes it more expensive for banks to borrow from RBI, so banks may charge higher interest on loans to customers.
RBI can still change how it lends or takes deposits (like overnight or longer-term deals) to manage money in the banking system.
How it plays out — a real example
A branch operations officer in Indore checks the new repo rate hike and realizes her bank's borrowing cost from RBI just went up. She updates her loan pricing sheet to add 0.5% to new gold loans, so the bank still makes a profit, and she explains to a customer that the interest on their floating-rate loan will rise next month.
What changed
The fixed repo rate under the Liquidity Adjustment Facility (LAF) was increased by 50 basis points to 9.0%, effective July 30, 2008. The reverse repo rate remained at 6.0%. All other LAF terms stayed unchanged.
What it means for you
Banks will face higher borrowing costs from RBI, potentially leading to increased lending rates for customers. This tightening aims to curb inflationary pressures but may slow credit growth. Lenders should reassess their liquidity and pricing strategies.
What you must do
Review and adjust lending and deposit rates to reflect higher cost of funds.
Monitor liquidity positions closely as RBI retains flexibility to conduct variable rate or longer-term repos.
Prepare for potential further tightening by stress-testing loan portfolios.
Communicate rate changes to customers and update internal pricing models.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Borrowers with floating rate loans, Treasury and ALM teams
❓ Common questions
Regulatory timeline
Stated effective dateeffective July 30, 2008
Decoded by BankPulse2026-06-19 13:03 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Why did RBI hike the repo rate by 50 bps?
The hike was in response to current macroeconomic and overall monetary conditions, as part of the First Quarter Review of the Annual Statement on Monetary Policy for 2008-09.
Will the reverse repo rate also change?
No, the reverse repo rate remains unchanged at 6.0% as per the circular.
Can RBI conduct repo auctions at variable rates?
Yes, RBI retains flexibility to conduct repo/reverse repo auctions at fixed or variable rates, and can also conduct overnight or longer-term operations as needed.
📜 Read the original circular — full text as issued by RBI
RBI/2008-2009/103
FMD.MOAG.No.23 /01.01.001/2008-09
July 29, 2008
All Scheduled Commercial Banks (excluding RRBs) and Primary Dealers
Dear Sir,
Liquidity Adjustment Facility – Repo and Reverse Repo Rates
Please refer to paragraphs 104 and 105 of the ‘’ First Quarter Review of Annual Statement on Monetary Policy for the Year 2008-09 ” dated July 29, 2008 and our circular FMD.MOAG. No.19/01.01.01/2007-08 dated June 24, 2008 .
2. In view of the current macroeconomic and overall monetary conditions, it has been decided to increase the fixed repo rate under the LAF by 50 basis points from 8.5 per cent to 9.0 per cent with effect from July 30, 2008. The reverse repo rate under the LAF remains unchanged at 6.00 per cent. All other terms and conditions of the current LAF Scheme remain unchanged.
3. Your attention is also drawn to paragraphs 106 and 107 ibid where it has been reiterated that the Reserve Bank has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant and that it retains the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibility including the right to accept or reject tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient use of the LAF in daily liquidity management.
Yours faithfully
(Chandan Sinha)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-2009/103 · issued 29 Jul 2008. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks (excluding RRBs), Primary dealers, Borrowers with floating rate loans, Treasury and ALM teams), your first concrete step on “RBI Hikes Repo Rate by 50 bps to 9%” is: “Review and adjust lending and deposit rates to reflect higher cost of funds.” (RBI issued this 29 Jul 2008).
Circular: RBI/2008-2009/103 -- RBI Hikes Repo Rate by 50 bps to 9%
Issued: 29 Jul 2008
Action required: Review and adjust lending and deposit rates to reflect higher cost of funds.
Action required: Monitor liquidity positions closely as RBI retains flexibility to conduct variable rate or longer-term repos.
Action required: Prepare for potential further tightening by stress-testing loan portfolios.
Action required: Communicate rate changes to customers and update internal pricing models.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4381&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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