RBI MPC raises repo rate 25 bps to 5.50%, shifts to tightening

The Announcement

The Reserve Bank of India's Monetary Policy Committee (MPC) raised the policy repo rate by 25 basis points (0.25 percentage points), or 25 bps, taking it from 5.25% to 5.50%. The decision was announced in the Monetary Policy Statement, 2026-27 - Resolution of the Monetary Policy Committee dated 7 October 2026 (RBI press release 2026-2027/1264), following the committee's 63rd meeting held from 5 to 7 October 2026.

Alongside the repo rate, the standing deposit facility (SDF) rate is set at 5.25% and the marginal standing facility (MSF) rate and the Bank Rate at 5.75% each, per the resolution. The MPC also changed its policy stance to "calibrated tightening". The six-member committee was unanimous on the rate increase; on the stance, two members, Dr Nagesh Kumar and Prof Ram Singh, preferred to retain the "neutral" stance, the resolution records. The revised repo rate applies from the announcement, while loans linked to it reprice on their own reset dates.

Why It Changed

Per the resolution, the MPC acted because the inflation outlook had deteriorated. The committee said price pressures were "not benign as they were last year", citing supply-side pressures from a deficient monsoon, El Nino conditions and high energy prices, alongside elevated inflation expectations and strong growth in monetary and credit aggregates. CPI inflation had risen to 4.8% in August 2026, the resolution notes.

The resolution projects CPI inflation at 5.2% for 2026-27, with quarterly readings of 4.9% in Q2, 6.0% in Q3 and 5.7% in Q4, and 5.6% for Q1 of 2027-28; core inflation is projected at 4.4%. On growth, the MPC projects real GDP at 7.1% for 2026-27 (7.2% in Q2, 6.9% in Q3 and 6.8% in Q4), after 7.8% growth in Q1. These are the committee's own figures, stated in the resolution.

Impact on Borrowers

A repo change reaches borrowers through their lender's external benchmark lending rate (EBLR), which is reset periodically. Consider an illustration on a Rs 50 lakh, 20-year floating-rate home loan (principal P = Rs 50,00,000, tenure n = 240 months). The EMI formula is EMI = P x r x (1+r)^n / ((1+r)^n - 1), where r is the monthly rate (the annual rate divided by 12).

Taking a representative home-loan rate of 8.50% before the change, the monthly rate is 0.085/12 and the EMI works out to about Rs 43,391. If the full 25 bps is passed through and the rate moves to 8.75%, the EMI rises to about Rs 44,186. That is a difference of about Rs 795 a month, or roughly Rs 1.9 lakh over the full 240-month term if the rate holds. These are illustrative figures at an assumed rate, not your actual loan numbers.

Transmission is not instant. EBLR-linked loans reprice on each loan's reset date, so the higher EMI shows up at the next reset rather than immediately; loans on the older MCLR benchmark move with a longer lag. Some lenders have already lifted their repo-linked lending rates, with one bank raising its repo-linked rate by 25 bps to 8.30% mirroring the RBI move. Borrowers on MCLR can ask their bank about switching benchmarks, though banks may charge a fee. Run your own figures on the home loan EMI calculator or, for unsecured borrowing, the personal loan EMI calculator.

Impact on Savers

Deposit rates are not set by the RBI; each bank decides whether and when to reprice its fixed deposits (FDs), and the State Bank of India chairman has noted depositors may not see an immediate benefit. A repo rise tends to nudge deposit rates up over time, but the timing and the size are a commercial decision for each bank.

To see the scale, take Rs 1 lakh in a one-year FD compounded quarterly. At 6.50%, the maturity value is about Rs 1,06,660, an interest of roughly Rs 6,660. If a bank lifts the rate by 25 bps to 6.75%, the maturity value is about Rs 1,06,923, an interest of roughly Rs 6,923 - about Rs 263 more over the year on Rs 1 lakh. These are illustrative bank rates, not RBI-set numbers. Test your own tenure and amount on the FD calculator.

What Happens Next

The repo rate stands at 5.50% from the 7 October 2026 announcement. From here, EBLR-linked borrowers will see the change on their next reset date, MCLR borrowers with a lag, and depositors only if and when their bank reprices its FDs.

The MPC meets on a bi-monthly schedule published in advance by the RBI, with the next review due in the December 2026 slot. What the committee decides then is not knowable now; only the calendar date is a matter of record. The full resolution, the Governor's Statement and the minutes, released later, are the authoritative account of this meeting.

FAQ

What exactly did the RBI announce?

The MPC raised the policy repo rate by 25 bps (0.25 percentage points) from 5.25% to 5.50% and changed its stance to "calibrated tightening", per the resolution dated 7 October 2026 (press release 2026-2027/1264). The SDF rate is 5.25% and the MSF rate and Bank Rate are 5.75% each.

When does the new rate take effect?

The repo rate of 5.50% applies from the 7 October 2026 announcement. For borrowers, the higher rate shows up on each loan's EBLR reset date rather than necessarily the same day, and MCLR-linked loans move with a longer lag.

How does this reach my EMI?

Through your lender's benchmark. On an illustrative Rs 50 lakh, 20-year loan repriced from 8.50% to 8.75%, the EMI moves from about Rs 43,391 to about Rs 44,186, roughly Rs 795 a month. Check your own loan on the home loan EMI calculator.

Does this change my existing FD?

No. An existing fixed deposit keeps the rate it was contracted at until maturity. Only new or renewed FDs carry a bank's revised rate, and whether a bank raises FD rates after a repo change is its own commercial decision.

Where can I read the official release?

The RBI's resolution dated 7 October 2026 carries the full decision, the vote and the projections, as press release 2026-2027/1264.

This report is based on the RBI Monetary Policy Committee resolution dated 7 October 2026. It was surfaced via coverage in The Hindu BusinessLine.