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Repo and Reverse Repo Rates Cut by 100 bps

Current · Source: Reserve Bank of India · RBI/2008-2009/341 · issued 02 Jan 2009 · ~1 min read
Quick answerRBI slashed repo rate from 6.5% to 5.5% and reverse repo rate from 5% to 4%, effective January 5, 2009, to address global and domestic macroeconomic conditions.
The rule, in the simplest words
How it plays out — a real example

A branch operations officer in Indore, Mr. Kumar, was happy to hear that the RBI had reduced the repo rate. This meant that the bank could lend money to customers at a lower interest rate, making it easier for them to borrow and repay their gold loans. Mr. Kumar decided to review the bank's loan rates and adjust them to make them more competitive, which would attract more customers and boost the bank's business.

What changed

The fixed repo rate under LAF was reduced by 100 basis points to 5.5%, and the reverse repo rate was cut by 100 basis points to 4%, effective from January 5, 2009. All other LAF terms remain unchanged.

What it means for you

Banks can now borrow from RBI at a lower cost, reducing their funding expenses. Lending rates may ease, potentially boosting credit demand, but net interest margins could compress if deposit rates don't adjust similarly.

What you must do

Who it affects

All scheduled commercial banks (excluding RRBs), Primary dealers

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

When do the new rates take effect?

The revised repo and reverse repo rates apply from January 5, 2009, for daily LAF auctions.

Why did RBI cut rates by 100 bps?

The decision was based on a review of current global and domestic macroeconomic conditions.

📜 Read the original circular — full text as issued by RBI
RBI/2008-2009/341 FMD.MOAG. No. 32/01.01.01/2008-09 January 2, 2009 All Scheduled Commercial Banks (excluding RRBs) and Primary Dealers Dear Sir, Liquidity Adjustment Facility – Repo and Reverse Repo Rates On a review of current global and domestic macroeconomic situation, the Reserve Bank has decided to reduce the fixed repo rate under the Liquidity Adjustment Facility (LAF) by 100 basis points from 6.5 per cent to 5.5 per cent and the reverse repo rate by 100 basis points from 5 per cent to 4 percent with immediate effect. 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 January 5, 2009. 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/2008-2009/341 · issued 02 Jan 2009. The plain-English explanation above is BankPulse’s own independent summary.
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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), your first concrete step on “Repo and Reverse Repo Rates Cut by 100 bps” is: “Review your asset-liability management to align with lower policy rates.” (RBI issued this 02 Jan 2009).

  1. Circular: RBI/2008-2009/341 -- Repo and Reverse Repo Rates Cut by 100 bps
  2. Issued: 02 Jan 2009
  3. Action required: Review your asset-liability management to align with lower policy rates.
  4. Action required: Consider repricing loans and deposits to maintain margins.
  5. Action required: Monitor liquidity conditions and adjust LAF participation accordingly.
  6. Owner: ____________ Target date: ____________
  7. Board/committee approval needed? Y / N
  8. 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.

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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=4737&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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