RBI raises repo rate 25 bps to 5.50%, turns to tightening stance

The Reserve Bank of India raised its policy repo rate by 25 basis points, from 5.25 per cent to 5.50 per cent, on Wednesday, 7 October 2026. Governor Sanjay Malhotra announced the decision after the 63rd meeting of the six-member Monetary Policy Committee, which met from 5 to 7 October. The committee also changed its stance from neutral to calibrated tightening. It is the first increase in the repo rate since February 2023 and the first under Malhotra.

The repo rate is the rate at which the RBI lends to banks. Banks tie many floating-rate loans to it, so a change usually feeds through to borrowers. After the 25 basis point rise, home, vehicle and business loans linked to the repo rate will generally get costlier when the lender next resets the rate. Fixed-rate loans are not affected. The exact effect depends on each bank's terms, so borrowers should check their loan agreement.

The move reverses the direction of recent policy. The repo rate had been held at 5.25 per cent at the last four reviews. By raising it while also lifting its growth forecast, the RBI is signalling that it sees the economy as strong enough to take higher rates, and that inflation is now its main worry.

The inflation path matters for the timing. The RBI expects price pressure to build in the second half of the year, with the October-December quarter forecast at 6.0 per cent, above the 4.9 per cent forecast for the quarter before it. Higher oil prices and the weather are the risks the governor named.

Savers may see better returns over time if banks pass on the higher policy rate to deposits, though banks decide this individually.

Policy rates at a glance Rate | Level after 7 October 2026 Repo rate | 5.50% Standing Deposit Facility | 5.25% Marginal Standing Facility | 5.75% Bank Rate | 5.75%

Short-term: Borrowers with repo-linked floating-rate loans can expect higher EMIs or longer tenures at their next reset. Banks may revise lending and deposit rates in the coming weeks.

Long-term: The tightening stance means the RBI is more likely to hold or raise rates than cut them while inflation risks remain. The path will depend on oil prices, the monsoon and food prices.

Who is affected: Home-loan and vehicle-loan borrowers, small businesses with floating-rate credit, banks, and savers with deposits.

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