The Reserve Bank of India (RBI) raised its key lending rate, the repo rate, by 25 basis points (0.25 percentage point) from 5.25% to 5.5% on 7 October 2026. It is the RBI's first rate increase since February 2023, when the repo rate went up to 6.50%. The decision was taken at the Monetary Policy Committee (MPC) meeting held from 5 to 7 October.
The decision in brief
- Repo rate: 5.5% (up from 5.25%). This is the rate at which the RBI lends short-term money to banks.
- Standing Deposit Facility (SDF) rate: 5.25%.
- Marginal Standing Facility (MSF) rate and Bank Rate: 5.75%.
- Vote: All six MPC members voted for the hike.
- Stance: Changed from "neutral" to "calibrated tightening" by a 4–2 vote; the two external members who disagreed preferred to stay neutral.
Governor Sanjay Malhotra said near-term rate cuts are off the table, and that how long and how far rates rise will depend on how growth and inflation turn out. The repo rate had been held at 5.25% for the previous four MPC meetings, after cuts totalling 125 basis points in 2025.
Why the RBI acted
The RBI said inflation risks were no longer benign. Reasons cited in reports of the policy include high oil prices, tighter global financial conditions and food-price risks from a weak southwest monsoon and a strong El Niño. The Week reported that retail inflation (CPI) was 4.82% in August, above the RBI's 4% target for a third month in a row, and that India's crude oil cost averaged $114–116 a barrel in September amid renewed US–Iran conflict.
New projections for 2026-27
- CPI inflation: 5.2% for the full year, up from 5%. Quarter-wise: 4.9% in Q2, 6% in Q3 and 5.7% in Q4.
- Real GDP growth: 7.1% for the full year. Quarter-wise: 7.2% in Q2, 6.9% in Q3 and 6.8% in Q4.
What it means for loans and deposits
Most floating-rate loans in India are linked to an external benchmark, usually the repo rate. According to The Week, over 68% of floating-rate rupee loans from scheduled commercial banks are linked to such External Benchmark-Based Lending Rates (EBLR). When the repo rate rises, banks raise these lending rates, and borrowers see either a higher EMI or a longer loan tenure, depending on the bank's reset terms and the option chosen. Loans taken at a fixed rate do not change until their fixed period ends.
Banks set their own deposit rates, and the repo rate is one of several factors they consider; any change in FD rates will be announced by individual banks.
The minutes of the meeting are due on 21 October, and the next MPC meeting is scheduled for 2 to 4 December 2026.