Several banks have raised their repo-linked lending rates by 25 basis points (0.25 percentage point) after the Reserve Bank of India (RBI) increased its repo rate on 7 October 2026. This means interest costs are set to go up for many borrowers with floating-rate home, car and personal loans.
What RBI did
RBI's Monetary Policy Committee raised the repo rate, the rate at which RBI lends to banks, by 25 basis points to 5.50%, from 5.25%. It was the central bank's first rate increase since 2023. The decision was unanimous. The standing deposit facility rate was set at 5.25%, and the marginal standing facility rate and bank rate at 5.75%. The committee also changed its policy stance to "calibrated tightening"; two members preferred to keep it neutral.
Which banks have raised rates
Since October 2019, banks have had to link most new floating-rate retail loans to an external benchmark, usually the repo rate. Each bank adds its own margin to arrive at its repo-linked or external benchmark lending rate (RLLR or EBLR). When the repo rate moves, this rate moves with it.
Business Standard (9 October) and Free Press Journal (8 October) both reported these increases:
- Punjab National Bank: 8.10% to 8.35%
- Indian Overseas Bank: 8.10% to 8.35%
- Indian Bank: 7.95% to 8.20%
- Tamilnad Mercantile Bank: 8.25% to 8.50%
- Karur Vysya Bank: 8.55% to 8.80%
Most of these were reported as effective from 8 October 2026. Business Standard also reported Bank of India (8.10% to 8.35%) and UCO Bank (8.05% to 8.30%). Both outlets also listed Bank of Baroda, but their figures differ, and the reports also differ on Indian Bank's effective date. Borrowers should check the exact rate and date on their own bank's website.
The final interest rate a borrower pays is this benchmark plus a spread, which depends on the loan and the borrower's profile.
Who is affected, and how much
Borrowers whose loans are linked to the repo rate are the most directly affected. Their rate changes on the reset date set out in the loan agreement, often every three months. Loans linked to the older MCLR (marginal cost of funds based lending rate) system reset differently and may not change immediately. Fixed-rate loans generally stay the same for the fixed period, depending on the terms.
When rates rise, a bank can either raise the EMI or keep the EMI the same and extend the remaining tenure. Business Standard gave an example: on a ₹40 lakh home loan with 20 years left, a rise from 8.5% to 8.75% would increase the EMI by about ₹630 a month.
Banks also tend to review fixed deposit rates after a policy change, but deposit rates are set by each bank based on its funding needs and do not move automatically with the repo rate.