The Reserve Bank of India on Wednesday, October 7, raised the repo rate by 25 basis points to 5.5 per cent. It is the central bank’s first rate increase since February 2023.
The Monetary Policy Committee unanimously backed the decision, taking the benchmark rate up from 5.25 per cent. It also shifted its stance from “neutral” to “calibrated tightening”, signalling greater concern over inflation.
Rising crude oil prices and supply pressures weighed on the policy review. The RBI now expects inflation to average 5.2 per cent in the 2026–27 financial year, compared with its earlier estimate of 5 per cent.
The central bank also raised its growth forecast for the year from 6.7 per cent to 7.1 per cent, reflecting a stronger economic outlook.
For borrowers, the hike could mean higher interest costs on loans linked to the repo rate. Depending on the lender and loan terms, customers may face an increase in their monthly instalments or a longer repayment period when their interest rates reset.
