The repo rate is the interest rate at which the Reserve Bank of India lends short-term money to commercial banks. It's one of the RBI's most powerful tools for managing inflation and economic growth across the entire country, and it's decided periodically by the RBI's Monetary Policy Committee based on how the economy is behaving.
When the RBI raises the repo rate, borrowing becomes more expensive for banks, and banks typically pass that cost on by raising interest rates on loans (like home loans) and, often, on deposits (like FDs) too. When the RBI cuts the repo rate, the opposite tends to happen — loans get cheaper, but so do deposit returns. This is why repo rate changes, announced roughly every two months, tend to make news — they ripple through EMIs, FD rates, and the broader economy fairly quickly.