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Repo and Reverse Repo Rate Hiked by 25 bps

Current · Source: Reserve Bank of India · RBI/2010-2011/107 · issued 02 Jul 2010 · ~1 min read

Quick answerRBI raised repo rate to 5.50% and reverse repo rate to 4.00%, effective July 2, 2010, as part of a calibrated exit from expansionary policy. Second LAF will run daily until July 16, 2010.

The rule, in the simplest words

RBI (India's central bank) raised the repo rate (the interest banks pay to borrow money from RBI) from 5.25% to 5.50%.
RBI also raised the reverse repo rate (the interest RBI pays to banks for keeping money with it) from 3.75% to 4.00%.
These changes started on July 2, 2010, and make borrowing costlier for banks, which may lead to higher loan rates for people.
A second daily borrowing/lending window called SLAF (Second Liquidity Adjustment Facility) will run every day until July 16, 2010, to help banks manage their cash better.

How it plays out — a real example

A branch operations officer in Indore, Priya, checks her bank's system on July 2, 2010, and sees the repo rate has jumped to 5.50%. She knows this means her bank will pay more to borrow from RBI, so she updates her loan pricing sheet to prepare for higher lending rates on new gold loans, and she reminds her team to use the daily SLAF window to fine-tune their cash needs until July 16.

What changed

The repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 5.25% to 5.50%, and the reverse repo rate was similarly raised from 3.75% to 4.00%, both with immediate effect. Additionally, the Second LAF (SLAF) will be conducted daily up to July 16, 2010, based on current liquidity assessment.

What it means for you

This signals the start of monetary tightening, making borrowing costlier for banks and potentially raising lending rates. Daily SLAF operations provide finer liquidity management, helping banks adjust short-term positions more frequently. Banks should prepare for higher funding costs and review their asset-liability management strategies.

What you must do

Update internal systems to reflect new repo and reverse repo rates for LAF transactions.
Prepare for daily SLAF operations until July 16, 2010, by ensuring adequate collateral and liquidity planning.
Communicate rate changes to treasury and ALM teams to reassess funding costs and lending rate strategies.
Monitor liquidity conditions closely as RBI continues calibrated exit from expansionary stance.

Who it affects

All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Treasury and ALM departments, Borrowers and depositors indirectly through rate changes

❓ Common questions

Regulatory timeline

Stated effective date effective July 2, 2010
Decoded by BankPulse 2026-06-19 05:04 IST

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

Why did RBI hike repo and reverse repo rates?

The RBI assessed the current macroeconomic situation and decided to begin a calibrated exit from expansionary monetary policy, raising rates to manage inflation and liquidity.

What is the Second LAF (SLAF) and why is it daily now?

SLAF is an additional liquidity adjustment window. It will be conducted daily up to July 16, 2010, to provide finer liquidity management based on current liquidity conditions.

Do other terms of the LAF scheme change?

No, all other terms and conditions of the current LAF Scheme remain unchanged.

📜 Read the original circular — full text as issued by RBI

RBI/2010-2011/107

 FMD.MOAG. No. 45 /01.01.01/2010-11

 July 2, 2010

 All Scheduled Commercial Banks (excluding RRBs)

 and Primary Dealers

 Dear Sir,

 Liquidity Adjustment Facility – Repo And Reverse Repo Rates 

 On an assessment of the current macroeconomic situation, it has been decided to take the following monetary policy measures as a part of the calibrated exit from the expansionary monetary policy:

 to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.25 per cent to 5.50 per cent with immediate effect.

 to increase the reverse repo rate under the LAF by 25 basis points from 3.75 per cent to 4.00 per cent with immediate effect.

 2. Also, on the basis of an assessment of the current liquidity situation, it has been decided to conduct the second LAF (SLAF) on a daily basis up to July 16, 2010. 

 3. All other terms and conditions of the current LAF Scheme will remain unchanged.

 4. Please acknowledge receipt.

 Yours sincerely

 (P. Krishnamurthy)

 Chief General Manager

 Related Press Release/Notification

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-2011/107 · issued 02 Jul 2010. The plain-English explanation above is BankPulse’s own independent summary.

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Who does what — compliance checklist

⚙️ Operations

Prepare for daily SLAF operations until July 16, 2010, by ensuring adequate collateral and liquidity planning.

💻 IT / Systems

Update internal systems to reflect new repo and reverse repo rates for LAF transactions.

📜 Compliance

Communicate rate changes to treasury and ALM teams to reassess funding costs and lending rate strategies.
Monitor liquidity conditions closely as RBI continues calibrated exit from expansionary stance.

Grouped from the action items above — a single circular may involve more than one team.

Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Treasury and ALM departments, Borrowers and depositors indirectly through rate changes), your first concrete step on “Repo and Reverse Repo Rate Hiked by 25 bps” is: “Update internal systems to reflect new repo and reverse repo rates for LAF transactions.” (RBI issued this 02 Jul 2010).

Circular: RBI/2010-2011/107 -- Repo and Reverse Repo Rate Hiked by 25 bps
Issued: 02 Jul 2010
Action required: Update internal systems to reflect new repo and reverse repo rates for LAF transactions.
Action required: Prepare for daily SLAF operations until July 16, 2010, by ensuring adequate collateral and liquidity planning.
Action required: Communicate rate changes to treasury and ALM teams to reassess funding costs and lending rate strategies.
Action required: Monitor liquidity conditions closely as RBI continues calibrated exit from expansionary stance.
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.

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BankPulse Compliance Evidence Pack — generated 03 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=5858&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.