ExplainerRBI
What the repo rate is, and how it reaches your EMI
The RBI's main policy rate moved up to 5.50% in October 2026. Here is how a decision in Mumbai finds its way into your home loan instalment.
The short answer
The repo rate is the interest rate at which the RBI lends money to banks for short periods. Most new floating-rate home and car loans are linked to it, and banks must reset them at least once every three months, so a change usually reaches your EMI within a quarter. As of October 2026 the repo rate is 5.50%.
What is the repo rate?
The repo rate is the interest rate at which the Reserve Bank of India lends to banks for short periods. The RBI describes it as the rate at which it “provides liquidity under the liquidity adjustment facility”. Banks borrow against government and other approved securities, which they pledge as collateral.
It is the RBI’s main policy rate. When it changes, the cost of money for banks changes, and that flows through to the rates banks charge borrowers and pay depositors.
Who decides it?
A six-member Monetary Policy Committee (MPC) sets the repo rate by vote. Three members are from the RBI: the Governor, who chairs it, the Deputy Governor in charge of monetary policy, and one officer nominated by the RBI’s central board. The other three are external members; as of October 2026 they are Dr Nagesh Kumar, Saugata Bhattacharya and Prof. Ram Singh.
The MPC must meet at least four times a year, and four members make a quorum. Each member has one vote. If the vote is tied, the Governor has a second, casting vote.
Why does the RBI raise or cut it?
The RBI moves the repo rate mainly to keep consumer price inflation near 4%. That target was given a legal basis by an amendment to the RBI Act in May 2016. The government sets it in consultation with the RBI every five years, with a tolerance band of 2% to 6%. In March 2026 the target was kept unchanged for April 2026 to March 2031.
When inflation threatens to rise, the MPC raises the rate to make borrowing dearer and cool demand. When inflation is low and growth needs support, it cuts. In October 2026 it raised the rate by 25 basis points, saying inflation and its outlook “are not benign as they were last year”. It expects inflation to reach 6.0% in October-December 2026.
How does a repo rate change reach my home loan?
Most new floating-rate retail loans are tied directly to the repo rate, and banks must reset them at least once every three months. Since 1 October 2019, the RBI has required banks to link new floating-rate personal and retail loans, such as home and car loans, and floating-rate loans to micro and small enterprises, to an external benchmark.
Banks can choose the RBI’s repo rate, the three- or six-month Treasury bill yield, or another market benchmark published by Financial Benchmarks India (FBIL). A bank must use the same benchmark for all loans in one category. Your loan rate is the benchmark plus a spread that the bank sets. When the repo rate rises by 0.25 percentage point, a repo-linked loan rises by the same amount at the next reset.
How much will my EMI go up?
For a typical long home loan, a 25 basis point increase adds a few hundred rupees a month per ₹50 lakh borrowed. The example below uses assumed terms to show the size of the effect. Your own figures will depend on your rate, balance and remaining tenure.
Illustration: ₹50 lakh home loan, 20 years
- ₹41,822monthly EMI at an assumed 8.00%
- ₹42,603monthly EMI at 8.25%, after a 25 bps rise
- ₹781extra per month, about ₹1.87 lakh over 20 years
If a lender keeps the EMI unchanged and extends the tenure instead, this example would need about 12 more monthly instalments. Ask your bank which option applies to your loan.
Does every loan reprice at once?
No: the timing depends on your loan’s benchmark and its reset dates. The RBI’s rule requires a reset at least once every three months, so a repo-linked loan may take up to a quarter to reflect a change.
The spread over the benchmark is set by the bank. Under the 2019 rules, the credit risk part of the spread can change only if your credit assessment changes substantially, as agreed in the loan contract. Other parts, such as operating costs, can be changed once every three years.
Transmission is not always even. The Governor’s statement of 7 October noted “dissimilar movements in deposit and lending rates” in July-August, and said the weighted average lending rate on fresh rupee loans rose 8 basis points in those two months.
What are the SDF and MSF rates?
They are the floor and ceiling around the repo rate. The standing deposit facility (SDF) rate is what the RBI pays banks for parking surplus money with it overnight, and it sits 25 basis points below the repo rate. The marginal standing facility (MSF) rate is the penal rate at which banks can borrow overnight to meet sudden liquidity shortages, 25 basis points above the repo rate. The Bank Rate moves with the MSF.
As of October 2026, the SDF rate is 5.25% and the MSF rate and Bank Rate are 5.75%.
Where has the repo rate been?
The repo rate is 5.50% as of October 2026, after a cutting cycle in 2025 and a pause through most of 2026. It was raised to 6.50% in February 2023 and stayed there until 2025, when the MPC cut it to 5.50% by June. A further cut on 5 December 2025 took it to 5.25%. The 7 October 2026 increase brought it back to 5.50%.
| 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 next MPC meeting is on 2 to 4 December 2026.
The documents
- Monetary policy: overview and policy ratesReserve Bank of India, 11 October 2026
- External Benchmark Based Lending (circular RBI/2019-20/53)Reserve Bank of India, 4 September 2019
- Monetary Policy Statement, 2026-27: Resolution of the MPC, October 5 to 7, 2026Reserve Bank of India, 7 October 2026
- Governor's Statement, October 7, 2026Reserve Bank of India, 7 October 2026
- Minutes of the MPC Meeting, February 6-8, 2023Reserve Bank of India, 22 February 2023