Repo rate

The rate at which the Indian central bank lends to commercial banks against government securities. It is the country's benchmark policy rate.

Changes transmit into the economy through bank lending rates, through the government bond curve, and through the exchange rate.

Transmission is neither immediate nor complete. Banks reprice deposits and loans at different speeds, and a large share of Indian bank lending is linked to external benchmarks that move with the policy rate directly while the rest lags.

For a company, the rate matters through its own borrowing cost and through demand in rate-sensitive sectors: housing, autos and anything sold on credit.

The rate is the signal. Transmission is the mechanism.

The stance announced alongside the rate carries information the rate itself does not. A hold with a shift from accommodative to neutral says the next move is more likely to be up than down, and bond markets reprice on that sentence rather than on the unchanged number. The vote split does similar work: a unanimous decision and a four-to-two decision on the same rate say different things about what happens at the next meeting. Both are published, and both are read by people who trade the curve long before any borrowing cost changes.