The RBI raised rates for the first time since 2023. Here’s what it does to your EMI and FD.
On 7 October 2026 the Reserve Bank of India raised the repo rate by a quarter of a percentage point, from 5.25% to 5.50%, and changed its stance to “calibrated tightening”. It is the first increase since February 2023. A floating-rate home loan with ₹30 lakh still owed and 20 years left, at 7.50%, pays about ₹461 more a month once the bank passes the hike on. Fixed deposits you already hold keep the rate they were opened at, and as of 12 October no large bank had raised its deposit rates.
In short. Each quarter-point on a home loan with 20 years left adds about ₹15 to ₹16 a month for every ₹1 lakh you owe. When it reaches you depends on what the loan is linked to: repo-linked loans move at the next reset, which RBI rules require at least once every three months, and several banks moved their repo-linked rates on 8 October. You can usually choose between a higher EMI and a longer loan; on the example below, the longer loan costs ₹1.63 lakh more in interest. Deposits are a different story: the rate rise has not reached new FDs yet.
What the RBI decided on 7 October
The Monetary Policy Committee met from 5 to 7 October 2026 and voted unanimously to raise the policy repo rate by 25 basis points to 5.50%. The rates tied to it moved by the same amount: the standing deposit facility rate, which banks earn on money they park with the RBI, to 5.25%, and the marginal standing facility rate and Bank Rate to 5.75%.
The committee also changed its stance from neutral to calibrated tightening. That part was not unanimous: two of the six members, Nagesh Kumar and Ram Singh, wanted to keep it neutral. The reason given was inflation. The RBI now projects consumer price inflation at 5.2% for 2026-27, rising to 6.0% in October to December and 5.7% in January to March, against its 4% target. It still projects the economy to grow 7.1% this year.
The last increase was on 8 February 2023, when the repo rate went from 6.25% to 6.50%. Between then and now the rate was only held or cut, to 5.25% by December 2025. The next meeting is on 2 to 4 December 2026.
What a quarter-point does to a home loan EMI
Take a floating-rate home loan with ₹30 lakh still owed and 20 years (240 EMIs) left, at 7.50% before the hike. If the bank passes the full quarter-point on, the rate becomes 7.75%.
The EMI comes from the standard formula: EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the amount owed, r the monthly rate and n the number of months left. At 7.50%, r is 0.625% and the EMI is ₹24,168. At 7.75%, r is 0.6458% and the EMI is ₹24,628. The exact difference before rounding is ₹460.66, so about ₹461 a month, or ₹1.11 lakh more over the 20 years.
The rise is larger the more you owe, the longer the loan has left and the higher your rate already is. The table runs the same quarter-point on other cases.
| Rate before the hike | 15 years left | 20 years left | 25 years left | 30 years left |
|---|---|---|---|---|
| 7.25% | ₹424 | ₹457 | ₹486 | ₹511 |
| 7.50% | ₹428 | ₹461 | ₹490 | ₹516 |
| 8.00% | ₹435 | ₹469 | ₹499 | ₹525 |
| 8.50% | ₹441 | ₹477 | ₹507 | ₹534 |
| 8.75% | ₹445 | ₹480 | ₹512 | ₹538 |
Rates on new loans have already moved up the table. ICICI Bank quotes 8.75% to a salaried borrower with a credit score of 750 or more, using the 5.50% repo rate from 8 October. Where the extra EMI lands in the loan matters too: early in a loan most of each EMI is interest, which where your home loan EMI money actually goes works through month by month.
When your EMI actually goes up
The repo rate is not your loan rate. Your bank adds a spread to a benchmark, and what happens next depends on which benchmark your sanction letter names.
Repo-linked loans. Since October 2019 banks have had to link new floating-rate retail loans to an external benchmark, usually the repo rate for home loans, and to reset the rate at least once every three months. Your rate changes at your next reset date, not on the day of the announcement. Several banks raised their repo-linked lending rates by the full 25 basis points from 8 October:
| Bank | Before | From 8 October |
|---|---|---|
| Bank of Baroda | 7.90% | 8.15% |
| Indian Bank | 7.95% | 8.20% |
| Punjab National Bank | 8.10% | 8.35% |
| Bank of India | 8.10% | 8.35% |
| Indian Overseas Bank | 8.10% | 8.35% |
| Tamilnad Mercantile Bank | 8.25% | 8.50% |
State Bank of India had not moved by 12 October. Its external benchmark rate was still 7.90%, built on the old 5.25% repo rate plus a 2.65% spread, effective from 15 December 2025.
MCLR-linked loans. Older loans are often linked to the bank’s own marginal cost of funds based lending rate (MCLR). It follows what the bank pays for deposits and borrowing rather than the repo rate directly, and the loan resets on its own schedule, often once every six or twelve months. These loans usually feel a hike later and less exactly. In August 2026 the RBI proposed that every floating-rate loan reset at least once every three months from 1 April 2027; as of 12 October that was still a draft.
Higher EMI or a longer loan
A rate rise can be absorbed two ways: the EMI goes up and the end date stays, or the EMI stays and the loan runs longer. Under the RBI’s 2023 rules on resetting floating rates on EMI loans, the lender must tell you immediately when either changes, and must let you choose a higher EMI, a longer tenure or a mix of the two, or prepay part or all of the loan. It must also send a statement every quarter showing the EMIs left. In the RBI’s terms a home loan to an individual is a personal loan, which is the category those rules cover.
On the ₹30 lakh example the choice looks like this:
| Monthly EMI | Loan ends after | Total interest from here | |
|---|---|---|---|
| Before the hike, at 7.50% | ₹24,168 | 240 months | ₹28.00 lakh |
| Higher EMI | ₹24,628 | 240 months | ₹29.11 lakh |
| Same EMI, longer loan | ₹24,168 | 252 months (the last one ₹7,688) | ₹30.74 lakh |
Keeping the EMI the same adds a year to the loan and ₹2.74 lakh of interest; paying ₹461 more a month adds ₹1.11 lakh. The longer loan costs ₹1.63 lakh more because the balance comes down more slowly, so interest is charged on more of it for longer. Which suits you is a question of monthly cash, not arithmetic alone.
Banks often extend the tenure by default, so if you would rather pay the higher EMI, check your next quarterly statement and ask. Prepaying is the third option, and on a floating-rate home loan the bank cannot charge you for it, as the EMI breakdown explains with the RBI’s 2014 circular.
What it does to fixed deposits
The FDs you already hold do not change. A fixed deposit keeps the rate it was opened at until it matures, whatever the RBI does in between.
New FDs have not moved yet. Deposit rates follow what banks need to pay to attract money, not the repo rate directly. SBI’s rates for the general public, unchanged since 15 December 2025, are 6.25% for one to two years, 6.40% for two to three years, 6.30% for three to five years and 6.05% for five to ten years, with senior citizens getting 0.50 percentage points more, or 1 point more on five to ten years. SBI’s chairman, C S Setty, told reporters on 8 October that “there may not be any rate action on the deposits because we have sufficient liquidity in the system”.
In real terms, SBI’s one-to-two-year rate of 6.25% sits about one point above the RBI’s 5.2% inflation projection for the year, before tax. FD interest is taxed every year at your slab rate. If you want to know whether that gap is enough for you, the inflation that matters is the one in your own spending; your personal inflation rate shows how to work it out.
Car loans, personal loans and credit cards
Car loans and personal loans are often written at a fixed rate. If yours is, the hike changes nothing on it; the rate in the sanction letter holds to the end. If it is floating, the same reset rules apply as for a home loan, though on a shorter loan the change is smaller: a quarter-point on a ₹5 lakh, five-year loan at 9% adds about ₹60 a month. Credit card interest is set by the card issuer, usually 42% to 48% a year, and a quarter-point on the repo rate does not move it.
What “calibrated tightening” means for the next meetings
The phrase says the next move, if any, is more likely up than down. It does not commit the RBI to a hike at every meeting. The RBI last used it in October 2018, when it changed its stance to calibrated tightening while holding the repo rate at 6.50%. The governor at the time, Urjit Patel, said the RBI was not bound to raise rates at every meeting. Four months later, in February 2019, it went back to neutral and cut the rate to 6.25%.
This time the RBI has already raised once, and its own projection has inflation at 6.0% in the current quarter. The next decision comes on 4 December. Until then, the two numbers worth watching on your own loan are the benchmark in your sanction letter and your next reset date.
Questions worth asking
How much will my EMI rise after the October 2026 repo rate hike?
On a floating-rate home loan, about ₹15 to ₹16 a month for every ₹1 lakh you still owe, if 20 years are left and the bank passes on the full 0.25 percentage points. With ₹30 lakh owed at 7.50%, the EMI rises from ₹24,168 to ₹24,628, which is ₹461 before rounding. With longer tenures, larger balances or higher rates the rise is larger: ₹538 on ₹30 lakh at 8.75% with 30 years left.
When will my bank pass on the repo rate hike?
At your loan’s next reset date. Repo-linked loans must reset at least once every three months, so the change reaches you within three months at most. Bank of Baroda, Indian Bank, Punjab National Bank, Bank of India, Indian Overseas Bank and Tamilnad Mercantile Bank raised their repo-linked rates from 8 October 2026. SBI’s external benchmark was still on the old 5.25% repo rate on 12 October. Loans linked to MCLR reset on their own schedule, often every six or twelve months.
Is it better to increase the EMI or the tenure when rates rise?
It costs less to increase the EMI. On ₹30 lakh owed with 20 years left, a rise from 7.50% to 7.75% adds ₹1.11 lakh of interest if the EMI goes up by ₹461, and ₹2.74 lakh if the EMI stays the same and the loan runs another 12 months. RBI rules require the lender to let you choose between a higher EMI, a longer tenure or both, and to let you prepay instead.
Will FD rates go up after the repo rate hike?
Not yet. FDs you already hold keep their rate until maturity. For new deposits, SBI’s rates were unchanged as of 12 October 2026, at 6.05% to 6.40% for the general public, and its chairman said on 8 October that there may not be any rate action on deposits because the banking system has enough liquidity. Deposit rates follow banks’ need for funds, so they can lag a repo rate rise by months.
What does calibrated tightening mean?
It means the RBI’s next move, if any, is more likely to be a rate rise than a cut, but it is not committed to raising rates at every meeting. The RBI adopted the same stance in October 2018 while holding rates, then returned to neutral and cut rates in February 2019. In October 2026 it raised the repo rate to 5.50% at the same time as adopting the stance.
Related
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Sources
- Monetary Policy Statement, 2026-27: Resolution of the Monetary Policy Committee, 5 to 7 October 2026 (repo rate raised 25 basis points to 5.50%, stance calibrated tightening, inflation and growth projections) — Reserve Bank of India, 7 Oct 2026
- Monetary Policy Statement, 2022-23: Resolution of the Monetary Policy Committee, 6 to 8 February 2023 (repo rate raised to 6.50%) — Reserve Bank of India, 8 Feb 2023
- Schedule of Monetary Policy Committee meetings for 2026-27 — Reserve Bank of India, 23 Mar 2026
- External benchmark based lending: new floating-rate retail loans linked to an external benchmark, reset at least once in three months (RBI/2019-20/53) — Reserve Bank of India, 4 Sep 2019
- Reset of floating interest rate on equated monthly instalment based personal loans (RBI/2023-24/55) — Reserve Bank of India, 18 Aug 2023
- Draft Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026, for comment (three-month reset proposed from 1 April 2027) — Reserve Bank of India, 12 Aug 2026
- RBI rate hike to 5.50%: banks’ revised repo-linked lending rates from 8 October 2026 — Bajaj Broking, 8 Oct 2026
- Home loan interest rates: 8.75% for salaried borrowers with a credit score of 750 or more, repo rate 5.50% from 8 October 2026 — ICICI Bank
- Interest rates: external benchmark rate 7.90% (repo 5.25% plus 2.65% spread), effective 15 December 2025 — State Bank of India
- Retail domestic term deposits below ₹3 crore, rates from 15 December 2025 — State Bank of India
- RBI repo rate hike: will SBI and other banks increase fixed deposit rates? (C S Setty, via PTI) — Upstox, 9 Oct 2026
- Edited transcript of the fourth bi-monthly monetary policy press conference, 2018-19 (stance changed to calibrated tightening, repo rate held at 6.50%) — Reserve Bank of India, 5 Oct 2018
- RBI cuts repo rate by 25 basis points to 6.25%, changes stance to neutral — Business Today, 7 Feb 2019
Rates as of 12 October 2026. Banks change their rates often, so check your lender’s own page and your sanction letter before relying on them. The EMI figures are our calculation with the standard formula and assume the full 0.25 percentage points is passed on at once. This is an explanation of the arithmetic, not a recommendation about your money. TLDR Money is not a registered investment adviser and earns no commission on any product mentioned.