- A repo rate hike directly impacts borrowers by increasing the cost of loans linked to external benchmarks or marginal cost of funds-based lending rate (MCLR). - Higher repo rates are deployed by the central bank to rein in liquidity and counter inflationary pressures in the economy. - Existing borrowers face higher EMIs or extended loan tenures, which can dampen consumer demand and private investment. - **Reserve Bank of India:** India's central banking institution that controls the monetary policy of the Indian rupee, regulates the banking system, and acts as a lender of last resort. - **Monetary Policy Committee:** A statutory body headed by the RBI Governor responsible for fixing the benchmark interest rate (repo rate) to contain inflation within targeted limits. **Introduction** The article explains the transmission mechanism of a repo rate hike by the Reserve Bank of India on individual and corporate borrowers, detailing how changes in policy rates translate to higher borrowing costs, increased EMIs, and broader impacts on macroeconomic liquidity and inflation management. **Core Issue and Detailed Points** - A repo rate hike directly impacts borrowers by increasing the cost of loans linked to external benchmarks or marginal cost of funds-based lending rate (MCLR). - Higher repo rates are deployed by the central bank to rein in liquidity and counter inflationary pressures in the economy. - Existing borrowers face higher EMIs or extended loan tenures, which can dampen consumer demand and private investment. **Key Statutory Bodies, Acts & Concepts** - **Reserve Bank of India:** India's central banking institution that controls the monetary policy of the Indian rupee, regulates the banking system, and acts as a lender of last resort. - **Monetary Policy Committee:** A statutory body headed by the RBI Governor responsible for fixing the benchmark interest rate (repo rate) to contain inflation within targeted limits.