RBI MPC October 2026: Economists Expect the First Repo Rate Hike Since February 2023
The RBI's Monetary Policy Committee (MPC) met from October 5 to 7, 2026. Its decision was due on October 7, to be announced by RBI Governor Sanjay Malhotra.
A poll of bank economists pointed to a 25 basis point hike in the repo rate, from 5.25% to 5.50%. In a separate Reuters poll of 61 economists, 35 expected the same hike.
If it happens, it would be the RBI's first rate increase since February 2023, when the repo rate was raised to 6.50%. The rate has been held at 5.25% for four meetings in a row, after 125 basis points of cuts in 2025.
The reasons given by economists: retail inflation rose to 4.82% in August 2026 (above the 4% target for a third month), crude oil is costly (Brent above $100 a barrel) and the rupee is weak.
Before the meeting, the other policy rates were: Standing Deposit Facility (SDF) 5.00%, and Marginal Standing Facility (MSF) and Bank Rate 5.50%. These move together with the repo rate.
A repo rate hike would make many home, car and small-business loans costlier, because most new floating-rate bank loans are directly linked to the repo rate.
External Benchmark Lending Rate (EBLR): How a Repo Rate Change Reaches Your Loan
The External Benchmark Lending Rate, or EBLR, is a way of setting the interest rate on a bank loan by linking it to a rate that the bank does not control, such as the RBI's repo rate. Your loan rate equals that outside "benchmark" plus a fixed extra amount called the spread. So when the RBI changes the repo rate, your loan rate changes too, within about three months. Since October 1, 2019, all new floating-rate retail loans and loans to micro and small businesses given by banks must use such an external benchmark.
Because most new floating-rate loans are linked to the repo rate, a 25 basis point hike to 5.50% would raise many home, car and small-business loan rates at their next reset, within about three months. This is the EBLR system working as designed: fast transmission. Borrowers would see either a higher EMI or a longer loan, and banks must explain these choices to them.
Monetary Policy Committee (MPC): How RBI Sets the Repo Rate
The Monetary Policy Committee is a six-member committee that decides India's main interest rate, the repo rate. Three members come from the RBI, including the Governor, who chairs it, and three outside experts are appointed by the central government for four years. Each member has one vote, and the Governor has a casting vote if the votes tie. Its legal job is to keep inflation close to the 4% target while keeping growth in mind.
The October 2026 decision is taken by the MPC by majority vote. Economists expect it to raise the repo rate for the first time since February 2023. How each member votes will be known when the minutes are published two weeks later.
Liquidity Adjustment Facility (LAF): The RBI's Interest Rate Corridor
The Liquidity Adjustment Facility is the set of daily tools the RBI uses to add money to the banking system or take extra money out of it. The repo rate sits in the middle of a corridor. The Standing Deposit Facility (SDF) rate, at which banks park extra money with the RBI, is the floor. The Marginal Standing Facility (MSF) rate, an emergency borrowing window for banks, is the ceiling. The overnight interbank rate (the Weighted Average Call Rate) is meant to stay close to the repo rate.
A repo rate hike moves the whole corridor up by the same amount. This raises the cost of overnight money for banks, which then passes on to deposit and loan rates.
- MPC meeting: October 5 to 7, 2026; decision announced October 7
- Repo rate before the meeting: 5.25% (held for four meetings)
- Expected decision (economist polls): 25 basis point hike to 5.50%; 35 of 61 economists in a Reuters poll expected it
- Last repo rate hike: February 2023 (to 6.50%); 125 basis points of cuts in 2025 took it to 5.25%
- CPI inflation: 4.82% in August 2026 (4.45% in July)
- Brent crude: above $100 a barrel in September 2026
- Q1 FY27 GDP growth: 7.8%
- Corridor before the meeting: SDF 5.00%, MSF and Bank Rate 5.50%
- EBLR-linked loans: 64.8% of outstanding floating-rate loans (end-September 2025)