The Reserve Bank of India raised the repo rate by 25 basis points to 5.50% on 7 October 2026. The Monetary Policy Committee, chaired by Governor Sanjay Malhotra, voted unanimously to increase the policy rate from 5.25% and changed the stance from neutral to calibrated tightening.
Repo Rate and Monetary Policy Committee
The repo rate is the rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities. The Monetary Policy Committee has six members and is responsible for fixing the policy repo rate under the Reserve Bank of India Act, 1934.
Policy Stance and Rate Cycle
This was the first repo rate hike by the Reserve Bank of India since February 2023. The central bank had earlier followed a series of rate cuts in 2025 and then maintained a prolonged pause before the October 2026 decision.
Inflation and Growth Projections
The policy decision was linked to inflation pressures, West Asia conflict-related risks, elevated crude oil prices, and a weaker rupee. The Reserve Bank of India raised its real GDP growth projection for financial year 2026-27 to 7.1% and increased its Consumer Price Index inflation forecast for FY27 to 5.2% from 5.0%.
Important Facts for Exams
- A repo rate change of 25 basis points is equal to 0.25 percentage points.
- The repo rate is a key policy instrument used by the Reserve Bank of India for liquidity management and inflation control.
- The Consumer Price Index measures retail inflation in India.
- The Monetary Policy Committee announces its policy decisions after scheduled meetings under the Reserve Bank of India framework.
Exam-Relevant Facts
Retail inflation had accelerated to 4.82% in August 2026. Future policy action was stated to be limited to a rate hike or a pause, depending on economic conditions.
