Current · Source: Reserve Bank of India · RBI/2008-2009/241 · issued 20 Oct 2008 · ~2 min read
Quick answerRBI slashed the repo rate by 100 basis points to 8.0% with immediate effect (October 20, 2008), to ease liquidity pressures from global constraints. The reverse repo rate stays at 6.0%. All other terms and conditions of the current LAF Scheme remain unchanged.
The rule, in the simplest words
The RBI (Reserve Bank of India, the country's central bank) cut the repo rate (the interest rate at which banks borrow money from RBI) from 9.0% to 8.0% on October 20, 2008.
The reverse repo rate (the interest rate RBI pays banks when they deposit money with RBI) stayed the same at 6.0%.
All other rules of the LAF (Liquidity Adjustment Facility, a tool RBI uses to manage money in banks) did not change.
This rate cut was done to help banks get cheaper money and ease pressure from global money problems.
How it plays out — a real example
A branch operations officer in Indore, Priya, saw the RBI's repo rate cut from 9.0% to 8.0% on October 20, 2008. She knew her bank could now borrow from RBI at a lower cost, so she quickly updated her loan pricing sheet to offer slightly lower interest rates to new gold-loan customers, hoping to attract more borrowers and boost lending in her branch.
What changed
The fixed repo rate under the Liquidity Adjustment Facility was reduced by 100 basis points from 9.0% to 8.0%, effective immediately. Special term repo and Second LAF repo will also operate at 8.0% from October 20, and all LAF repos from October 21, 2008. The reverse repo rate remains unchanged at 6.0%.
What it means for you
This sharp rate cut signals RBI's aggressive response to global liquidity tightening, aiming to lower borrowing costs for banks and stimulate lending. Banks can now access cheaper funds from RBI, potentially reducing their cost of funds and encouraging credit flow to the economy. The unchanged reverse repo rate keeps the corridor between repo and reverse repo at 200 bps, maintaining a clear policy signal.
What you must do
Review your bank's funding costs and adjust lending rates accordingly to pass on the benefit to borrowers.
Reassess liquidity management strategies to optimize use of the cheaper repo window.
Communicate the rate cut impact to treasury and credit teams for updated pricing and risk assessments.
Monitor market reactions and adjust investment portfolios, especially in government securities.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury departments, Corporate and retail borrowers
❓ Common questions
Why did RBI cut the repo rate by 100 bps in October 2008?
To alleviate emerging pressures from the indirect impact of global liquidity constraints, making funds cheaper for banks.
Does this change affect the reverse repo rate?
No, the reverse repo rate remains unchanged at 6.00%.
When does the new repo rate take effect for all LAF repos?
Special term repo and Second LAF repo from October 20, 2008, and all LAF repos from October 21, 2008.
📜 Read the original circular — full text as issued by RBI
RBI/2008-2009/241
FMD.MOAG. No.28/01.01.01/2008-09
October 20, 2008
All Scheduled Commercial Banks (excluding RRBs)
and Primary Dealers
Dear Sir,
LIQUIDITY ADJUSTMENT FACILITY – REPO AND REVERSE REPO RATES
In order to alleviate emerging pressures in the context of the indirect impact of global liquidity constraint, the Reserve Bank of India has decided to reduce the fixed repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points to 8.0 per cent from 9.0 per cent with immediate effect. Accordingly, the special term repo and the repo under the Second LAF would be conducted at the revised rate of 8.0 per cent with effect from October 20, 2008. From October 21, 2008 onwards, all repos under LAF would be conducted at 8.0 per cent.
2. The reverse repo rate under LAF remains unchanged at 6.00 per cent.
3. All other terms and conditions of the current LAF Scheme remain unchanged.
Yours faithfully
(Chandan Sinha)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-2009/241 · issued 20 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.
Communicate the rate cut impact to treasury and credit teams for updated pricing and risk assessments.
📜 Compliance
Review your bank's funding costs and adjust lending rates accordingly to pass on the benefit to borrowers.
Reassess liquidity management strategies to optimize use of the cheaper repo window.
Monitor market reactions and adjust investment portfolios, especially in government securities.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury departments, Corporate and retail borrowers), your first concrete step on “RBI Cuts Repo Rate by 100 bps to 8.0%” is: “Review your bank's funding costs and adjust lending rates accordingly to pass on the benefit to borrowers.” (RBI issued this 20 Oct 2008).
Circular: RBI/2008-2009/241 -- RBI Cuts Repo Rate by 100 bps to 8.0%
Issued: 20 Oct 2008
Action required: Review your bank's funding costs and adjust lending rates accordingly to pass on the benefit to borrowers.
Action required: Reassess liquidity management strategies to optimize use of the cheaper repo window.
Action required: Communicate the rate cut impact to treasury and credit teams for updated pricing and risk assessments.
Action required: Monitor market reactions and adjust investment portfolios, especially in government securities.
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=4569&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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