Mumbai: Loans in India are set to get a little costlier. The Reserve Bank of India (RBI) on Wednesday, 7 October 2026, raised its main lending rate, the repo rate, by 0.25 percentage point to 5.50 per cent. It is the first increase since February 2023. Governor Sanjay Malhotra pointed to rising prices, costly oil and the conflict in West Asia. He also said rate cuts are now off the table in the near term.
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What happened
The decision came from the RBI’s Monetary Policy Committee, or MPC. This is a six member panel that sets the repo rate. It met from 5 to 7 October, its 63rd meeting, with Mr Malhotra in the chair. All six members voted for the increase.
The repo rate is the interest rate at which the RBI lends money to banks for short periods. When it goes up, banks pay more to borrow, and they usually pass that cost on to their own borrowers.
The rate had stood at 5.25 per cent since December 2025. Before that, the RBI had cut it step by step from 6.50 per cent, The Hindu reported.
Why the RBI raised the rate
In one word, prices. Retail inflation, which tracks how fast everyday prices rise, went up to 4.8 per cent in August from 4.5 per cent in July. The RBI’s goal is to keep it close to 4 per cent.
Food got dearer across the board, the RBI said. Two items stood out. Sugar prices jumped about 34 per cent between early July and the end of August, reaching Rs 64 a kg. Onion prices rose about 85 per cent from the end of June to the end of September. In August, items making up about 37 per cent of the price basket, by weight, were rising faster than 4 per cent a year.
Oil is the other big worry. The fighting in West Asia flared up again in September. According to figures quoted by the RBI, the price of the crude oil India buys averaged 116.1 US dollars a barrel in September, against 82.0 dollars in July. The monsoon also ended 13 per cent below normal, and strong El Nino conditions could hurt the coming rabi crop.
“It is clear that inflation and its outlook are not benign as they were last year,” the MPC said in its statement. In plain words, prices are not as calm as they were a year ago.
Key numbers from the policy
- Repo rate: up from 5.25 per cent to 5.50 per cent. Linked rates also rose: the standing deposit facility rate to 5.25 per cent, and the marginal standing facility rate and Bank Rate to 5.75 per cent.
- Policy stance: changed from neutral to calibrated tightening.
- Inflation forecast for this financial year (2026 to 27): 5.2 per cent, up from 5 per cent earlier, as reported by The Indian Express.
- Growth forecast for this financial year: 7.1 per cent, raised from 6.7 per cent. The economy grew 7.8 per cent in April to June.
- Next MPC meeting: 2 to 4 December 2026. Minutes of this meeting will come out on 21 October.
What calibrated tightening means
The stance is the RBI’s signal about where rates may go next. Neutral meant rates could go either way. Calibrated tightening means the next step can only be another increase or a pause, not a cut. The MPC said rate cuts “are off the table in the near term.” How many more increases come will depend on prices and growth.
Two members, Dr Nagesh Kumar and Prof. Ram Singh, wanted to keep the stance neutral, though both voted for the rate increase itself.
Banks have started raising loan rates
Some lenders acted within hours. According to Business Today, CNBC TV18 and Business Standard, these banks raised their repo linked lending rates by 0.25 percentage point:
- Punjab National Bank: from 8.10 per cent to 8.35 per cent, from 8 October. The bank said its MCLR and base rate are unchanged.
- Bank of Baroda: from 7.90 per cent to 8.15 per cent.
- Indian Bank: from 7.95 per cent to 8.20 per cent, from 8 October.
- Bank of India and Indian Overseas Bank: both to 8.35 per cent.
- Tamilnad Mercantile Bank: from 8.25 per cent to 8.50 per cent.
- UCO Bank: UCO Float from 8.05 per cent to 8.30 per cent, from 8 October.
- RBL Bank: repo linked lending rate at 8.50 per cent as of 7 October.
These are benchmark rates. The rate you actually pay is the benchmark plus a margin set in your loan agreement. More banks are expected to follow.
What it means for you
If you have a home loan or car loan
Many home loans are floating rate loans linked to the repo rate. If yours is one of them, your interest rate will go up at the next reset date. Your bank will then either raise your EMI or stretch the number of months you pay.
How much more? Loan site BankBazaar gave CNBC TV18 an example. On a Rs 50 lakh home loan for 25 years, a rise from 7.5 per cent to 7.75 per cent lifts the EMI from about Rs 36,950 to about Rs 37,766. That is around Rs 817 more each month. For a Rs 30 lakh loan, the extra is about Rs 490 a month.
If your loan is linked to MCLR, the change may come later, since banks set MCLR from their own costs. A fixed rate loan does not change just because the repo rate went up. Check your loan papers or the bank app for your benchmark and reset date. Our guide to home loan interest rates explains these terms.
If you save in fixed deposits
There may be some good news. The Indian Express noted that deposit rates could rise slightly as banks review their funding needs, though that depends on how much cash banks already have. Read our explainer on FD interest rates and maturity before you lock in money.
If you plan to borrow
With cuts ruled out for now, plan your budget on today’s rates, not on hopes of cheaper loans. Our piece on home loan versus personal loan may help.
What happens next
The minutes, due on 21 October, will show how each member saw the decision. The next policy decision is due on 4 December. Kotak Mahindra Bank’s chief economist, Upasna Bhardwaj, was quoted by The Hindu as expecting another 0.25 to 0.50 percentage point of increases. The RBI itself has not given any number.
In his closing words, Mr Malhotra said, “We shall strive for price and financial stability as both are essential for sustainable growth in the long run.”
Sources
- Reserve Bank of India, Monetary Policy Statement, Resolution of the Monetary Policy Committee, 5 to 7 October 2026, released 7 October 2026
- Reserve Bank of India, Governor’s Statement, 7 October 2026
- The Hindu, RBI MPC meeting highlights: Repo rate hiked to 5.5%, 7 October 2026
- The Indian Express, RBI hikes repo rate to 5.50% after 3.5 years: how your EMIs will be impacted, 8 October 2026
- Business Today, Loans get costlier: PNB, BOB, others hike rates after RBI repo rate hike, 8 October 2026
- Business Standard, State-owned banks raise repo-linked lending rates by 25 bps after RBI move, updated 9 October 2026
- CNBC TV18, More banks raise loan rates as RBI repo hike filters through, 7 October 2026
- CNBC TV18, RBI repo rate hike: how much your home loan EMI may rise, 7 October 2026