Banks borrow some money from the Reserve Bank on a more or less continuous basis - for instance, when they need notes to fill their automated teller machines. The Reserve Bank lends funds to the banks at an interest rate called the repurchase rate or repo rate. Currently it amounts to 13,5 per cent per annum.
Because the Reserve Bank is the ultimate source of currency in our economy, the interest rate at which it supplies funds to the banks serves as a benchmark for the banks ‘ other interest rates. They set their deposit rates below the repurchase rate, and their lending rates above the repurchase rate.