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RBI raises repo rate by 25 basis points to 5.50%
RBI raises repo rate by 25 basis points to 5.50%
Bi-monthly Monetary Policy: RBI Raises Repo Rate by 25 bps After Over 3 Years
- The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously increased the policy repo rate by 25 basis points to 5.50% in its October 2026 meeting, citing rising inflationary pressures and continued global economic uncertainty.
- The decision was taken during the 63rd MPC meeting, held from 5 to 7 October 2026, under the chairmanship of RBI Governor Sanjay Malhotra.
- Along with the repo rate hike, the MPC changed its monetary policy stance to “calibrated tightening”, indicating that future action could involve another rate hike or a pause depending on the inflation and growth outlook.
RBI Revises Key Policy Rates
|
Policy Rate
|
Revised Rate
|
|---|---|
|
Repo Rate
|
5.50%
|
|
Standing Deposit Facility (SDF)
|
5.25%
|
|
Marginal Standing Facility (MSF)
|
5.75%
|
|
Bank Rate
|
5.75%
|
Note :Basis Point (bps): 1 basis point = 0.01 percentage point. Therefore, a 25-bps hike = 0.25 percentage point.
Why Did RBI Increase the Repo Rate?
The MPC observed that inflationary pressures had strengthened compared with the previous year.
-
CPI inflation: Increased to 4.8% in August 2026 from 4.5% in July 2026.
-
Core inflation: Rose to 4.2%.
-
Major inflation risks included:
-
Deficient south-west monsoon
-
Strong El Niño conditions
-
Higher energy and commodity prices
-
Rising food prices, including sugar and onion
-
Geopolitical uncertainty in West Asia
-
Monetary Policy Stance: Calibrated Tightening
The MPC changed its stance from neutral to “calibrated tightening.”
However, Dr. Nagesh Kumar and Prof. Ram Singh preferred retaining the previous neutral stance.
India’s GDP Growth Projection
The RBI noted that the Indian economy remains resilient despite global uncertainties.
India's real GDP grew by 7.8% in Q1 FY 2026-27, supported by private consumption, fixed investment, manufacturing activity and exports.
The RBI projected real GDP growth at 7.1% for FY 2026-27.
|
Period
|
GDP Growth Projection
|
|---|---|
|
FY 2026-27
|
7.1%
|
|
Q2 FY27
|
7.2%
|
|
Q3 FY27
|
6.9%
|
|
Q4 FY27
|
6.8%
|
|
Q1 FY 2027-28
|
7.1%
|
Investment activity is expected to remain supported by strong capacity utilisation, robust credit flows and the government’s continued focus on infrastructure.
CPI Inflation Forecast
The RBI projected CPI inflation at 5.2% for FY 2026-27.
|
Period
|
CPI Inflation Projection
|
|---|---|
|
FY 2026-27
|
5.2%
|
|
Q2 FY27
|
4.9%
|
|
Q3 FY27
|
6.0%
|
|
Q4 FY27
|
5.7%
|
|
Q1 FY 2027-28
|
5.6%
|
Core inflation forecast for FY 2026-27: 4.4%
Inflationary pressures are expected to remain elevated in the near term because of weather-related risks, commodity prices and geopolitical developments.
What Does a Repo Rate Hike Mean?
The repo rate is the rate at which the RBI lends short-term funds to commercial banks.
When the RBI increases the repo rate:
- Repo Rate ↑ → Banks' borrowing cost ↑ → Loan interest rates may ↑ → Borrowing/demand may ↓ → Inflationary pressure may ↓
Therefore, floating-rate loans such as home loans, auto loans and other loans can become more expensive if banks pass on the increase to customers.
Monetary Policy Committee — Members
The October 2026 MPC meeting was chaired by RBI Governor Sanjay Malhotra.
Members included:
-
Dr. Nagesh Kumar
-
Saugata Bhattacharya
-
Prof. Ram Singh
-
Dr. Poonam Gupta
-
Indranil Bhattacharyya
The MPC voted unanimously in favour of the 25-bps repo rate hike.
Key Facts
|
Particular
|
Details
|
|---|---|
|
MPC Meeting
|
63rd
|
|
Meeting Dates
|
5–7 October 2026
|
|
MPC Chairman
|
Sanjay Malhotra
|
|
Revised Repo Rate
|
5.50%
|
|
Repo Rate Change
|
+25 bps
|
|
SDF Rate
|
5.25%
|
|
MSF Rate
|
5.75%
|
|
Bank Rate
|
5.75%
|
|
Policy Stance
|
Calibrated Tightening
|
|
FY27 GDP Forecast
|
7.1%
|
|
FY27 CPI Inflation Forecast
|
5.2%
|
|
Next MPC Meeting
|
2–4 December 2026
|
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