Mumbai, October 7, 2026: The Reserve Bank of India (RBI) on Wednesday raised its key policy repo rate by 25 basis points to 5.50%, marking the first interest rate hike in nearly four years.
The decision was taken unanimously by the six-member Monetary Policy Committee (MPC) after its three-day meeting held from October 5 to 7. The last time the RBI raised the repo rate was in February 2023.
Along with the rate increase, the central bank also changed its monetary policy stance from “neutral” to “calibrated tightening”. This signals that rate cuts are off the table in the near term, and future policy actions will either be further rate hikes or a pause, depending on evolving data.
Repo Rate: Raised to 5.50%
Standing Deposit Facility (SDF) Rate: 5.25%
Marginal Standing Facility (MSF) Rate & Bank Rate: 5.75%
RBI Governor Sanjay Malhotra said the inflation outlook has worsened since the last policy meeting. He noted that inflation and its outlook are “not benign as they were last year.”
The central bank revised its inflation forecast upward to 5.2% for the current financial year (from 5.0% earlier). Headline CPI inflation is expected to average nearly 5.8% over the next three quarters. Core inflation is projected at 4.4%.
At the same time, the Indian economy remains strong. The RBI raised its GDP growth forecast for FY 2026-27 to 7.1% from 6.7% earlier, citing broad-based economic momentum.
The shift in stance indicates that the RBI is prepared to tighten monetary policy gradually if needed. Governor Malhotra clarified that the duration and extent of any rate-hike cycle will depend on actual growth and inflation developments.
The rate hike is expected to make loans slightly costlier. Home loans, personal loans, and auto loans linked to the repo rate may see a marginal increase in EMIs in the coming weeks as banks begin adjusting their lending rates.