RBI may raise the repo rate for the first time since 2023 as inflation stays above target
The Monetary Policy Committee meets from 5 to 7 October. Most economists polled expect a 25 basis point hike to 5.50%, which would push up home and car loan EMIs.
The Reserve Bank of India’s Monetary Policy Committee (MPC) begins its three-day meeting on Monday, 5 October, and the debate this time is about how much rates should rise, not whether they should fall. Governor Sanjay Malhotra will announce the decision at 10 am on Wednesday, 7 October.
The repo rate has been held at 5.25% for the last four policy reviews. A majority of economists now expect a 25 basis point increase to 5.50%. That would be the RBI’s first rate hike since February 2023, when it raised the rate to 6.5%.
Why a hike is on the table
- Inflation is above target. Retail inflation was 4.82% in August, above the RBI’s 4% medium-term target for the third month in a row.
- Wholesale prices are running hot. Wholesale inflation rose to 9.92% in August from 9.78% in July, which usually reaches shop shelves with a lag.
- The rupee is weak. It has fallen about 6% against the US dollar so far in 2026. That makes imports, especially fuel, more expensive.
- Other central banks are tightening. The US Federal Reserve raised its benchmark rate by 25 basis points to a range of 3.75% to 4% in September, and the Bank of Japan raised its rate to 1.25%.
In a Reuters poll of 61 economists conducted between 18 and 28 September, 35 expected a 25 basis point hike in October. Of 53 economists who gave a December forecast, 29 expected a further hike. In a separate Business Standard poll, eight of ten respondents predicted an increase this week.
Inflation will be closely watched at the upcoming MPC meeting, with a possible 25 bps rate increase being discussed. — Puja Abhishek Singh, CEO, Manipal Fintech, quoted by Outlook Money
What this means for you
If the repo rate rises, banks usually raise the interest on loans linked to an external benchmark within weeks. Most new home loans are linked to the repo rate, so their EMIs or tenures would go up. As an example, on a ₹50 lakh, 20-year home loan, a 0.25 percentage point increase adds roughly ₹750 to ₹800 to the monthly EMI, depending on your current rate. Fixed deposit rates tend to follow upwards, but more slowly.
Who decides
The six-member MPC is chaired by Governor Malhotra. It includes Deputy Governor Poonam Gupta, Executive Director Indranil Bhattacharyya and three external members: Nagesh Kumar, Saugata Bhattacharya and Ram Singh. At its August meeting, the committee held the rate at 5.25% and kept a neutral stance.
What happens next
The decision and the RBI’s updated growth and inflation forecasts will be announced at 10 am on 7 October. The Daily Rostrum will publish the decision and a plain-language guide to what it means for your loans and savings the same morning.
Sources: Outlook Money, Business Standard.