The RBI's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% on 7 October 2026. It is the first increase since February 2023, after cuts totalling 125 basis points in 2025 and four meetings at 5.25%. The committee also changed its stance from neutral to calibrated tightening and said rate cuts are off the table for now — the next move can only be a hike or a pause.
The key numbers
| Rate | Before | From 7 October 2026 |
|---|---|---|
| Repo rate | 5.25% | 5.50% |
| Standing deposit facility (SDF) | 5.00% | 5.25% |
| Marginal standing facility (MSF) and Bank Rate | 5.50% | 5.75% |
The MPC voted unanimously for the hike and 4–2 for the change in stance. It projects real GDP growth of 7.1% and CPI inflation of 5.2% for 2026-27.
Home loans: when your EMI changes
Banks must link floating-rate retail loans, including home loans, to an external benchmark such as the repo rate, and reset the rate at least once every three months. So if your home loan is repo-linked, expect the higher rate from your next reset date — your bank's sanction letter or loan statement shows it. Loans on MCLR move more slowly, as banks revise their MCLR.
Illustration (rates assumed for the example; your bank's spread decides your actual rate): a ₹50 lakh loan with 20 years left, moving from 8.50% to 8.75%.
| At 8.50% | At 8.75% | |
|---|---|---|
| Monthly EMI | ₹43,391 | ₹44,186 (about ₹795 more) |
| Or keep the EMI at ₹43,391 | 240 months | about 252 months (about 12 more) |
| Total interest over the full term | ₹54.14 lakh | ₹56.05 lakh |
Under RBI's EMI-reset framework, your lender must tell you about the change and offer choices: a higher EMI, a longer tenure, or a combination, plus the option to prepay. If you can afford it, a higher EMI (or a part-prepayment) usually costs less over the life of the loan than stretching the tenure.
Prepaying is free on most floating-rate loans. Lenders cannot charge pre-payment fees on floating-rate loans to individuals for non-business purposes; for all regulated lenders this applies to loans sanctioned or renewed from 1 January 2026. A rising-rate period is also a good time to compare your rate with other lenders — our balance transfer calculator shows whether switching pays after costs.
Under-construction flats: pre-EMI goes up
If you are paying pre-EMI (interest only on the amount disbursed so far), it rises with the rate. On ₹30 lakh disbursed, monthly pre-EMI goes from ₹21,250 at 8.50% to ₹21,875 at 8.75% (illustrative). Our pre-EMI calculator shows the effect across the remaining construction stages and of any possession delay.
Builders and businesses: re-test your numbers
- Construction finance and term loans linked to the repo rate or another external benchmark reprice at their reset; MCLR-linked loans follow the lender's MCLR. As a rough guide, every 0.25 points on ₹10 crore of average borrowing adds about ₹2.5 lakh of interest a year.
- Interest during construction rises, so re-run your project cash flow: our construction finance requirement calculator shows the peak funding gap and interest under the new rate.
- Check your DSCR headroom. Lenders test whether cash flows cover interest and principal. With the RBI signalling that more hikes are possible, run the DSCR calculator at today's rate and at 0.5 points higher.
- Working capital limits (cash credit, overdraft) usually reprice with the benchmark they are linked to — check your sanction letter.
MSMEs: interest on late payments rises to 17.25%
Under section 16 of the MSMED Act, a buyer who pays a micro or small supplier late owes compound interest with monthly rests at three times the Bank Rate notified by the RBI. With the Bank Rate now 5.75%, that is 17.25% a year from 7 October 2026, up from 16.50%. Where a delay spans the change, each month uses the rate prevailing at its start. Our MSME delayed payment interest calculator has been updated with the new rate.
What to do this month
- Find your reset date and benchmark (repo-linked or MCLR) in your loan statement.
- Decide EMI vs tenure before your bank resets it by default; consider a part-prepayment if you have surplus funds.
- Compare your rate with other lenders; a balance transfer can make sense if the gap is wide enough to cover the costs.
- Builders and MSMEs: re-run project cash flows and DSCR at a higher rate, and review working capital limits before renewal.
- MSME suppliers: update interest claims on overdue invoices to the new rate.
How Biz Corp Solutions helps
We help home buyers, builders and businesses understand how rate changes affect their loans, compare lenders and restructure or refinance where it makes sense — through banks, NBFCs and financial institutions. Explore our home loan and working capital services, or call us to review your loan.
This update reflects the RBI's policy announcement of 7 October 2026. Your loan's actual rate, reset date and options are set by your lender and your loan agreement.