RBI cuts repo and reverse repo rates by 100 bps each
Current · Source: Reserve Bank of India · RBI/2008-2009/312 · issued 08 Dec 2008 · ~1 min read
Quick answerRBI slashed the repo rate from 7.5% to 6.5% and reverse repo rate from 6% to 5%, effective December 8, 2008, to ease liquidity amid macroeconomic conditions.
The rule, in the simplest words
RBI (the central bank of India) cut the repo rate (the interest banks pay to borrow money from RBI) from 7.5% to 6.5% starting December 8, 2008.
RBI also cut the reverse repo rate (the interest RBI pays banks when they park extra money with RBI) from 6% to 5% starting December 8, 2008.
Banks can now borrow from RBI at a cheaper rate, so they have more money to lend to people and businesses.
The lower reverse repo rate makes it less attractive for banks to keep money with RBI, so they will lend more instead.
How it plays out — a real example
A branch operations officer in Indore checks the new rates on December 8, 2008. She sees the repo rate dropped to 6.5%, so she tells her branch manager they can now offer lower interest on gold loans to attract more customers, because their own borrowing cost from RBI has gone down.
What changed
The fixed repo rate under the Liquidity Adjustment Facility was reduced by 100 basis points from 7.5% to 6.5%, and the reverse repo rate was cut by 100 basis points from 6% to 5%, effective December 8, 2008. All other terms and conditions of the LAF scheme remain unchanged.
What it means for you
Banks can now borrow from RBI at a lower cost, reducing their funding expenses and encouraging lending. The reverse repo rate cut makes parking funds with RBI less attractive, nudging banks to deploy surplus liquidity into credit or investments. This coordinated easing aims to boost economic activity by lowering borrowing costs across the system.
What you must do
Review and adjust your bank's lending and deposit rates to reflect the lower policy rates.
Reassess liquidity management strategies to optimize use of the LAF window at revised rates.
Communicate the rate changes to treasury and credit teams for updated pricing of loans and advances.
Monitor market response and RBI's future guidance for further policy adjustments.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Borrowers and depositors indirectly through rate transmission
❓ Common questions
Regulatory timeline
Stated effective dateeffective December 8, 2008
Decoded by BankPulse2026-06-19 11:28 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
When do these rate changes take effect?
The revised repo and reverse repo rates are effective from December 8, 2008, the same date as the notification.
Do the terms of the LAF scheme change besides the rates?
No, all other terms and conditions of the current LAF scheme remain unchanged as per the notification.
Why did RBI cut rates by 100 bps each?
RBI cited a review of evolving macroeconomic and monetary/liquidity conditions as the reason for the reduction, aiming to ease liquidity and support economic activity.
📜 Read the original circular — full text as issued by RBI
RBI/2008-2009/312
FMD.MOAG. No. 31/01.01.01/2008-09
December 8, 2008
All Scheduled Commercial Banks (excluding RRBs)
and Primary Dealers
Dear Sir,
Liquidity Adjustment Facility – Repo and Reverse Repo Rates
As already announced on December 6, 2008, the Reserve Bank, on a review of the evolving macroeconomic and monetary/liquidity conditions, has decided to reduce the fixed repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points from 7.5 per cent to 6.5 per cent and the reverse repo rate by 100 basis points from 6 per cent to 5 percent with effect from December 8, 2008.
2. Accordingly, the daily reverse repo and repo auctions, including special term repo auctions, under LAF would be conducted at the revised rates with effect from December 8, 2008.
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/2008-2009/312 · issued 08 Dec 2008. The plain-English explanation above is BankPulse’s own independent summary.
Communicate the rate changes to treasury and credit teams for updated pricing of loans and advances.
📜 Compliance
Review and adjust your bank's lending and deposit rates to reflect the lower policy rates.
Reassess liquidity management strategies to optimize use of the LAF window at revised rates.
Monitor market response and RBI's future guidance for further policy adjustments.
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, Borrowers and depositors indirectly through rate transmission), your first concrete step on “RBI cuts repo and reverse repo rates by 100 bps each” is: “Review and adjust your bank's lending and deposit rates to reflect the lower policy rates.” (RBI issued this 08 Dec 2008).
Circular: RBI/2008-2009/312 -- RBI cuts repo and reverse repo rates by 100 bps each
Issued: 08 Dec 2008
Action required: Review and adjust your bank's lending and deposit rates to reflect the lower policy rates.
Action required: Reassess liquidity management strategies to optimize use of the LAF window at revised rates.
Action required: Communicate the rate changes to treasury and credit teams for updated pricing of loans and advances.
Action required: Monitor market response and RBI's future guidance for further policy adjustments.
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=4686&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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