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India

RBI raises repo rate by 25 basis points to 5.50 per cent

The rate increase is set to make home loans costlier and is prompting banks to start raising deposit rates as liquidity tightens.

Photo: The Economic Times

What happened

The Reserve Bank of India raised its policy repo rate by 25 basis points from 5.25 per cent to 5.50 per cent on October 7, 2026. BusinessLine It was the first policy rate increase by the central bank in four years. The Economic Times Banks are now starting to raise deposit rates, albeit marginally, as liquidity shrinks and credit demand surges through the busy season. The Economic Times Bank of India increased deposit rates for maturities between one and below three years by 10 to 35 basis points on Monday, becoming the second bank in this cycle to do so. The Economic Times Punjab National Bank and Indian Bank raised their marginal cost of funds based lending rates. BusinessLine

Around it

Governor Duvvuri Subbarao's earlier rate increase in the year was described as probably the last in the cycle, aimed at tempering price increases that threatened the central bank's credibility. The Economic Times Home loans were expected to become more expensive as banks end teaser rates. The Economic Times Deposit rates, unlike external benchmark-linked lending rates, take time to move higher. The Economic Times

Sources

  1. The Economic TimesRBI raises repo, reverse repo rates to tame inflation
  2. BusinessLinePNB, Indian Bank up MCLRs; BoI increases term deposit rates
  3. The Economic TimesA month after RBI's rate hike, banks start raising deposit rates as liquidity shrinks, Bank of India the latest to move

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