RBI raises repo rate by 25 bps to 5.50%, its first hike since February 2023

The Reserve Bank of India raised its policy repo rate by 25 basis points to 5.50% on 7 October 2026. It is the first increase since February 2023, when the Monetary Policy Committee (MPC) took the rate to 6.50%.

The six-member MPC, chaired by Governor Sanjay Malhotra, met from 5 to 7 October. It also changed its policy stance from neutral to “calibrated tightening”. The standing deposit facility rate is now 5.25%, and the marginal standing facility rate and the Bank Rate are 5.75%.

How the committee voted

All six members voted for the 25 basis point increase. The members are Governor Malhotra, Dr Poonam Gupta, Indranil Bhattacharyya, and the three external members, Dr Nagesh Kumar, Saugata Bhattacharya and Prof. Ram Singh.

The stance change was not unanimous. The resolution says: “Two members - Dr. Nagesh Kumar and Prof. Ram Singh - were of the view that the stance be retained at neutral.”

The committee said rate cuts are “off the table in the near term”, which leaves either another increase or a pause as the next move.

Why the RBI moved

The resolution says inflation and its outlook “are not benign as they were last year”. Headline CPI inflation rose to 4.8% in August from 4.5% in July, driven by food and fuel. Core inflation rose to 4.2%. About 37% of the CPI basket by weight showed inflation above 4%.

The MPC pointed to the West Asia conflict, volatile crude prices, a deficient south-west monsoon and strong El Niño conditions. It expects headline inflation to average almost 5.8% over the next three quarters.

In this milieu, recalibrating the policy rate is imperative.

Governor Malhotra’s statement added that a “weak southwest monsoon along with strong El Niño conditions may impact the upcoming rabi season and rural demand”.

Where rates have been since 2024

The repo rate stayed at 6.50% through 2024. The MPC then cut it three times in 2025, by a total of 100 basis points, to 5.50% by June, and cut again by 25 basis points to 5.25% on 5 December 2025. The October increase reverses that last cut.

6.50%6.25%6.00%5.50%5.25%5.50%

5.0%5.5%6.0%6.5%7.0%

Jan 2024Feb 2025Apr 2025Jun 2025Dec 2025Oct 2026

Repo rate since January 2024. Level after each change (%)

Item	Value
Jan 2024	6.50%
Feb 2025	6.25%
Apr 2025	6.00%
Jun 2025	5.50%
Dec 2025	5.25%
Oct 2026	5.50%

The new projections

The RBI raised its inflation forecast and still expects growth above 7%. Real GDP grew 7.8% in April-June, which the resolution says “was higher than expected”. At the end of August, ANI reported the RBI’s full-year growth forecast at 6.7%.

RBI projections, October 2026

• 5.2%CPI inflation, 2026-27
• 6.0%CPI inflation, Q3 (Oct-Dec 2026)
• 4.4%core inflation, 2026-27
• 7.1%real GDP growth, 2026-27

Quarter by quarter, the RBI expects CPI inflation of 4.9% in July-September, 6.0% in October-December, 5.7% in January-March and 5.6% in April-June 2027. Its growth projections for the same quarters are 7.2%, 6.9%, 6.8% and 7.1%. It says the risks to growth are evenly balanced.

What it means for borrowers

Since October 2019, banks have had to link new floating-rate retail loans, such as home and car loans, and loans to micro and small enterprises to an external benchmark. Most banks use the repo rate. These loans must be reset at least once every three months, so a repo-linked home loan will usually reprice within a quarter.

Lending rates were already edging up before the decision. The Governor’s statement noted that the weighted average lending rate on fresh rupee loans rose by 8 basis points in July-August.

What comes next

The minutes of the meeting, with each member’s reasoning, will be published on 21 October. The next MPC meeting is from 2 to 4 December 2026. CPI data for September is due on 12 October.