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

The Announcement

The Monetary Policy Committee (MPC) voted unanimously to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 bps (0.25 percentage points) to 5.50%, up from 5.25%, with the change effective immediately on 7 October 2026. The decision was taken at the committee's 63rd meeting, held from 5 to 7 October 2026 under the chairmanship of Governor Sanjay Malhotra, and announced in the Monetary Policy Statement, 2026-27 (Press Release 2026-2027/1264).

Consequently, the standing deposit facility (SDF) rate stands adjusted at 5.25% and the marginal standing facility (MSF) rate and the Bank Rate at 5.75%. These consequential changes were notified separately to LAF participants (notification RBI/2026-27/282, dated 7 October 2026). The rate decision was unanimous, but the MPC also decided to change the stance to calibrated tightening; two members, Dr Nagesh Kumar and Prof Ram Singh, were of the view that the stance be retained at neutral.

Why It Changed

Per the resolution, the committee judged that inflation and its outlook "are not benign as they were last year". The MPC said headline CPI inflation is expected to "average almost 5.8 per cent" over the next three quarters and projected core inflation at 4.4% for 2026-27. CPI inflation had risen to 4.8% in August 2026 from 4.5% in July, with the resolution noting that food price increases "have become more broad based" and that core inflation had picked up, "indicating some signs of widening price pressures".

The resolution notes that real GDP growth in Q1:2026-27, at 7.8%, was higher than expected, and projects growth of 7.1% for 2026-27. Against that backdrop of resilient growth and firming prices, the MPC said "recalibrating the policy rate is imperative". On the stance, the resolution states that the shift to calibrated tightening signals that "rate cuts are off the table in the near term" and that policy action ahead can be a rate hike or a pause depending on the evolving outlook.

Impact on Borrowers

A repo increase raises the cost of floating-rate loans, but not all at once. Most home loans sanctioned since October 2019 are linked to an external benchmark, usually the repo rate, through the EBLR framework; these reprice on each loan's reset date, typically quarterly, so a borrower may see the higher rate reflected within the next billing cycle or two rather than instantly. Loans still on the older MCLR system move with a lag as the bank's marginal cost of funds adjusts.

Illustration: on a Rs 50 lakh, 20-year (240-month) floating-rate home loan repriced from 8.50% to 8.75% on full transmission of the 25 bps increase, the EMI moves from about Rs 43,391 to about Rs 44,186 - roughly Rs 795 more a month. Over the full 240-month tenure, holding the rate constant, that is about Rs 1.91 lakh of additional interest. These are illustrations using an assumed prevailing rate; your actual rate, spread and reset date will differ. Run your own figures on the home loan EMI calculator, and for unsecured borrowing the personal loan EMI calculator.

Borrowers on MCLR can ask their bank about switching to an external benchmark; banks may charge a conversion fee. Where the lender permits it, the higher rate can also be absorbed by lengthening the loan tenure instead of raising the monthly instalment.

Impact on Savers

For depositors, a repo increase can translate into higher deposit rates, but bank fixed-deposit rates are each bank's commercial decision and are not changed by the RBI. Banks reprice deposits at their own pace, and the pass-through is rarely one-for-one.

Illustration: Rs 1 lakh in a one-year fixed deposit compounded quarterly earns about Rs 7,186 at 7.00% and about Rs 7,450 at 7.25%, a difference of about Rs 264 over the year. On a five-year deposit at the same rates, the maturity value rises from about Rs 1,41,478 to about Rs 1,43,226, a difference of about Rs 1,748. Work your own tenure and rate on the FD calculator.

Small-savings schemes such as PPF, NSC and SCSS are unaffected by this decision; those rates are set by the Finance Ministry each quarter, separately from the MPC.

What Happens Next

The repo rate of 5.50%, SDF of 5.25% and MSF and Bank Rate of 5.75% took effect on 7 October 2026. From here, transmission to borrowers depends on each loan's benchmark and reset date, and transmission to depositors depends on individual banks repricing their deposit products.

The minutes of this meeting are scheduled for publication on 21 October 2026, which will set out each member's recorded reasoning, including the two members who favoured a neutral stance. The RBI has scheduled the next MPC meeting for 2 to 4 December 2026.

FAQ

What exactly did the RBI announce?

The MPC voted unanimously to raise the policy repo rate by 25 bps to 5.50% from 5.25%, effective 7 October 2026, and to change its stance to calibrated tightening. The SDF rate is now 5.25% and the MSF rate and Bank Rate are 5.75%, per Press Release 2026-2027/1264.

When does the new rate take effect?

The repo rate change took effect immediately, on 7 October 2026, as stated in the resolution and in notification RBI/2026-27/282. When it reaches your loan depends on your loan's reset date, not the announcement date.

How does this reach my EMI?

EBLR-linked loans reprice on their reset dates, often quarterly; MCLR loans move with a lag. On full transmission of 25 bps, a Rs 50 lakh, 20-year loan repriced from 8.50% to 8.75% sees its EMI rise about Rs 795 a month. Check your own numbers on the home loan EMI calculator.

Does this change my existing FD or PPF balance?

No. An existing fixed deposit keeps its contracted rate until maturity. PPF, NSC and SCSS rates are set by the Finance Ministry quarterly and are not affected by this repo decision. New deposits may carry revised rates if your bank chooses to reprice.

Why did the MPC raise the rate?

Per the resolution, the committee judged inflation "not benign", with headline CPI expected to average almost 5.8% over the next three quarters and having risen to 4.8% in August 2026. The MPC said "recalibrating the policy rate is imperative".

Where can I read the official release?

The full resolution is on rbi.org.in as the Monetary Policy Statement, 2026-27 dated 7 October 2026 (Press Release 2026-2027/1264), linked in the source note below.

This report is based on the official RBI Monetary Policy Committee resolution dated 7 October 2026 and the related LAF rate-change notification dated 7 October 2026. The decision was also carried in aggregated coverage via Google News.