How Does India Borrow and Lend?

Repo rate changes move the markets, but the more interesting story is how money flows through the Indian economy, and how bond yields bend around both big economic events and the RBI's decisions.

Setting the Stage

3 rates tell the story: the repo rate, the 91-Day Treasury Bill cut-off yield, and the 10-year government bond yield.

The repo rate is what the RBI charges banks to borrow overnight against government securities. Put simply, it is the price of money in India, and everything else adjusts when it moves.

Why do banks borrow from the RBI at all? They must keep a share of their net demand and time liabilities (NDTL) as idle cash with it, 3% of NDTL as of early 2026, and that amount grows as household deposits grow.

The 91-Day T-Bill is short-term government borrowing from the public. Its cut-off yield is the highest rate accepted at the RBI's auction: the government's short-term borrowing cost.

The price of money in India, every time the RBI changed it.

The repo rate is what banks pay to borrow overnight against government paper. It holds a level until the committee moves it, which is why this is a staircase and not a curve.

Per cent per annum

4.00%, the lowest the repo rate has ever been

RBI Handbook of Statistics, Table 40 · Jun 2008 to Aug 2026

The 10Y G-Sec yield is what investors demand to lend to the Government of India for 10 years through its benchmark bond. It is the government's long-term borrowing cost, and the benchmark rate for the whole economy.

The Interplay

The short-term rate, the 91-Day T-Bill yield, reacts almost instantly to every decision of the Monetary Policy Committee. The 10-year yield follows the same trend but slowly, because it also prices in future repo rates, inflation, the fiscal deficit, global (especially US) yields and liquidity. If a hike or cut was already expected, the 10-year may barely move.