On October 7, the RBI raised the repo rate by 25 basis points to 5.50% and shifted its stance to “calibrated tightening.” Governor Sanjay Malhotra said a cut is off the table in the near term. On a ₹50 lakh home loan, EMIs rise by roughly ₹800 a month.
For ten months, the RBI held its repo rate at 5.25% and argued that inflation was coming from supply shocks it could not fix: oil from the war, food from the monsoon. On October 7 it changed its mind. The Monetary Policy Committee voted unanimously to raise the rate by 25 basis points to 5.50%, the first increase since February 2023. It also moved its stance from neutral to “calibrated tightening,” and Governor Sanjay Malhotra said plainly that a rate cut is off the table in the near term.
What changed
Three things moved at once. Inflation has been above the RBI’s 4% target since early summer and was heading toward the 5.9% peak the RBI itself predicted in August. The rupee fell to 96.43 per dollar on October 6, close to its May record low. And forex reserves have dropped by tens of billions of dollars since their September peak, as the RBI sold dollars to slow that fall. A central bank can spend reserves to defend a currency for a while. At some point, it has to make holding rupees more rewarding instead, and that is what a rate hike does.
The full package
The standing deposit facility rate, the floor of the RBI’s interest corridor, rises to 5.25%, and the marginal standing facility rate and bank rate to 5.75%. The RBI now projects 2026-27 growth at 7.1%, up from 6.7%, helped by the strong first quarter, and inflation at 5.2%. Not every member agreed on the stance: two preferred to stay neutral, even though all six backed the hike itself.
A rate hike is the RBI saying, in public, that it now fears rising prices and a falling rupee more than slower growth.
What it means at home
For borrowers, the era of falling EMIs that began in early 2025 is over. Floating-rate home and car loans will reset higher over the coming months. For savers, fixed deposit rates should start to rise, which is good news for grandparents living off interest. For the rupee, a higher return on Indian assets should help slow foreign selling. The next meeting is December 2 to 4. Whether it brings another hike or a pause will depend, once again, on oil and onions.
Sources: RBI Monetary Policy Statement, October 7, 2026.
- The RBI raised the repo rate from 5.25% to 5.50% on October 7, with a unanimous vote.
- The stance moved from neutral to “calibrated tightening”.
- The reasons: inflation above target for months, a rupee near record lows and falling reserves.
- Floating-rate EMIs will rise. On a ₹50 lakh, 20-year loan, by roughly ₹800 a month.
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