RBI and interest rates

The Reserve Bank of India sets the repo rate, the rate at which it lends to banks, to keep consumer price inflation near its 4% target. A six-member Monetary Policy Committee (MPC), chaired by the Governor, decides it by vote at least four times a year.

Where things stand

On 7 October 2026 the MPC raised the repo rate by 25 basis points to 5.50%, the first increase since February 2023. The vote was unanimous. It also changed its stance from neutral to “calibrated tightening”, with two members preferring to stay neutral, and said rate cuts are “off the table in the near term”.

The RBI cited rising inflation, the West Asia conflict, volatile crude prices, a deficient monsoon and El Niño. It projects CPI inflation of 5.2% and GDP growth of 7.1% for 2026-27.

Real GDP grew 7.8% in April-June, so the RBI is tightening while growth is still strong. Three days after the decision, with the rupee near 97 to the dollar, the RBI opened a window to supply dollars directly to three state-run oil companies and tightened rules on currency hedging.

Key numbers, October 2026

• 5.50%repo rate from 7 Oct 2026
• 5.25% / 5.75%SDF rate / MSF rate and Bank Rate
• 4% (2-6%)CPI inflation target, April 2026 to March 2031
• 6.0%projected CPI inflation, Oct-Dec 2026

Key dates

1. 8 Feb 2023MPC raises repo rate 25 bps to 6.50%
2. Feb-Jun 2025Three cuts totalling 100 bps take the rate to 5.50%
3. 5 Dec 2025Cut of 25 bps to 5.25%
4. 7 Oct 2026Hike of 25 bps to 5.50%; stance moves to calibrated tightening
5. 10 Oct 2026Dollar window for oil companies and tighter hedging rules announced
6. 21 Oct 2026Minutes of the October meeting due
7. 2-4 Dec 2026Next MPC meeting

Key questions

How quickly will my loan rate change? Most new floating-rate retail loans are linked to the repo rate and must be reset at least once every three months, so a change usually shows up within a quarter.

Who sits on the MPC? Governor Sanjay Malhotra (chair), two other RBI members, and three external members: Dr Nagesh Kumar, Saugata Bhattacharya and Prof. Ram Singh.

Could rates rise again? The MPC says the length and extent of the tightening will depend on underlying inflation, how widely prices rise and second-round effects of the supply shock. It has ruled out cuts in the near term.

What is the inflation target? 4% CPI inflation with a band of 2% to 6%, retained in March 2026 for April 2026 to March 2031.