In short
- The RBI raised the repo rate by 25 basis points to 5.50% on 7 October 2026, its first hike in this cycle.
- It changed its stance from "neutral" to "calibrated tightening", so further cuts are off the table for now.
- Loans linked to the repo rate will reset upwards at their next reset date. Plan cash flow for slightly higher EMIs.
What the RBI decided
The Monetary Policy Committee met from 5 to 7 October 2026 under Governor Sanjay Malhotra. It raised the repo rate from 5.25% to 5.50%. The Standing Deposit Facility is now 5.25%, and the Marginal Standing Facility and Bank Rate are 5.75%.
The reason is inflation. Consumer inflation rose to 4.8% in August 2026, driven by food and fuel prices, and the RBI expects it to average close to 5.8% over the next three quarters. It cited crude oil volatility, a deficient monsoon and global financial conditions as risks. Growth remains healthy, with GDP projected at 7.1% for 2026-27.
The next policy meeting is on 2 to 4 December 2026. The RBI has said the next move could be a hike or a pause, depending on inflation.
What it means for your loans
- Repo-linked loans (most MSME term loans and many working capital limits from banks since 2019): the interest rate rises by up to 0.25% at the next reset. On a ₹50 lakh loan, 0.25% is about ₹12,500 a year, roughly ₹1,000 a month.
- MCLR-linked loans: these move more slowly, but expect banks to raise MCLR over the coming months.
- NBFC and fintech loans: these are usually fixed or priced higher already; new loans may be quoted at higher rates.
- Deposits: fixed deposit rates may rise a little, which helps if you keep surplus cash.
What to do this quarter
- Check your loan terms. Find out whether each loan is linked to the repo rate, MCLR or a fixed rate, and when it next resets.
- Collect faster. Every week you cut from customer payment terms is cheaper than any loan. Chase overdue invoices before Diwali.
- Buy festive stock carefully. Borrowed money is getting dearer. Stock up on what sold last year, not on hope.
- Use TReDS if you supply large companies. Discounting invoices on TReDS can be cheaper than an overdraft. See our article on TReDS and MSME cash flow.
- Talk to your bank before you need money. Renewing or enhancing a limit is easier when your numbers are strong.
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Sources
This article is general information, not financial advice. Check your loan agreement and talk to your bank before making decisions.