Current · Source: Reserve Bank of India · RBI/2010-2011/138 · issued 27 Jul 2010 · ~1 min read
Quick answerRBI raised repo rate by 25 bps to 5.75% and reverse repo rate by 50 bps to 4.50%, effective from the second LAF on July 27, 2010, as part of the First Quarter Review of Monetary Policy 2010-11.
The rule, in the simplest words
The RBI (India's central bank) raised the repo rate (the interest banks pay when they borrow money from RBI) by 0.25% to 5.75% starting July 27, 2010.
It also raised the reverse repo rate (the interest banks earn when they lend extra money to RBI) by 0.50% to 4.50% on the same day.
Higher repo cost makes borrowing from RBI more expensive, while the higher reverse repo rate makes keeping extra cash with RBI more attractive, so banks may lend less to customers.
Banks should review their borrowing‑lending plans, adjust their own interest rates, and tell treasury and risk teams about the new rates.
How it plays out — a real example
Rohit Sharma, a senior treasury officer at State Bank of India in Mumbai, checks the bank’s cash position each morning. When he sees the repo rate rise to 5.75%, he decides to borrow a little less from the RBI and instead offers a modestly higher deposit rate to customers, while moving some surplus funds to the RBI to earn the new 4.50% reverse repo rate. He then informs the risk and treasury teams so everyone can update their cash‑flow forecasts.
What changed
The repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 5.50% to 5.75%. The reverse repo rate was raised by 50 basis points from 4.00% to 4.50%. These changes took effect from the second LAF on July 27, 2010.
What it means for you
Banks will face higher cost of borrowing from RBI under repo, tightening liquidity conditions. The larger hike in reverse repo makes it more attractive for banks to park funds with RBI, potentially reducing lending capacity. This signals RBI's intent to curb inflation by absorbing excess liquidity.
What you must do
Review your asset-liability management to account for higher funding costs from repo operations.
Adjust lending and deposit rates to maintain net interest margins amid tighter monetary conditions.
Monitor liquidity positions closely as reverse repo rate hike may encourage surplus funds to be parked with RBI.
Communicate the rate changes to treasury and risk management teams for updated cash flow projections.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers
❓ Common questions
When did these rate changes take effect?
The new repo and reverse repo rates became effective from the second Liquidity Adjustment Facility (LAF) on July 27, 2010.
Why did RBI hike reverse repo rate more than repo rate?
The 50 bps hike in reverse repo versus 25 bps in repo was aimed at making it more attractive for banks to deposit surplus funds with RBI, thereby absorbing excess liquidity and controlling inflationary pressures.
Did any other terms of the LAF change?
No, all other terms and conditions of the LAF scheme remained unchanged as per the circular.
📜 Read the original circular — full text as issued by RBI
RBI/2010-2011/138
FMD.MOAG. No.48/01.01.01/2010-11
July 27, 2010
All Scheduled Commercial Banks (excluding RRBs)
and Primary Dealers
Dear Sir,
Liquidity Adjustment Facility – Repo and Reverse Repo Rates
As announced in the First Quarter Review of Monetary Policy 2010-11 , it has been decided to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.50 per cent to 5.75 per cent and the reverse repo rate by 50 basis points from 4.00 per cent to 4.50 percent with effect from Second LAF of July 27, 2010.
2. All other terms and conditions of the current LAF Scheme will remain unchanged.
3. Please acknowledge receipt.
Yours sincerely
(P. Krishnamurthy)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-2011/138 · issued 27 Jul 2010. The plain-English explanation above is BankPulse’s own independent summary.
Review your asset-liability management to account for higher funding costs from repo operations.
📜 Compliance
Adjust lending and deposit rates to maintain net interest margins amid tighter monetary conditions.
Monitor liquidity positions closely as reverse repo rate hike may encourage surplus funds to be parked with RBI.
Communicate the rate changes to treasury and risk management teams for updated cash flow projections.
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 Operations 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 Rate Hiked in July 2010” is: “Review your asset-liability management to account for higher funding costs from repo operations.” (RBI issued this 27 Jul 2010).
Circular: RBI/2010-2011/138 -- Repo and Reverse Repo Rate Hiked in July 2010
Issued: 27 Jul 2010
Action required: Review your asset-liability management to account for higher funding costs from repo operations.
Action required: Adjust lending and deposit rates to maintain net interest margins amid tighter monetary conditions.
Action required: Monitor liquidity positions closely as reverse repo rate hike may encourage surplus funds to be parked with RBI.
Action required: Communicate the rate changes to treasury and risk management teams for updated cash flow projections.
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 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=5904&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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