What Is the Repo Rate? How the RBI's Key Rate Moves Your EMI, FD, Gold and Savings

• The repo rate is the interest rate at which the RBI lends money to banks for short periods, against government securities. It is the RBI's main tool for controlling inflation.
• It is set by the RBI's six-member Monetary Policy Committee (MPC). The current rate is 5.5%, raised from 5.25% on October 7, 2026.
• When the repo rate rises, floating-rate loans linked to it, such as most new home loans, become costlier within weeks.
• Deposit rates usually rise more slowly, because banks raise them only when they need more money from savers.
• Small savings schemes like PPF are set by the government each quarter and do not move automatically with the repo rate.
• The next MPC meeting is on December 2 to 4, 2026.

What does "repo" actually mean?

"Repo" is short for repurchase agreement. When a bank needs cash for a few days, it can sell government bonds to the RBI and promise to buy them back later at a slightly higher price. That difference, expressed as a yearly rate, is the repo rate. In simple terms, it is the price of borrowing money from the central bank.

Because the RBI sits at the top of the money system, this price spreads outward. If banks pay more to borrow from the RBI, they charge more when they lend to you. If they pay less, loans tend to get cheaper.

Two related rates sit on either side of the repo rate and form what economists call the policy corridor:

• Standing Deposit Facility (SDF) rate, now 5.25%: what the RBI pays banks that park spare money with it. It is the floor of the corridor.
• Marginal Standing Facility (MSF) rate, now 5.75%: an emergency window where banks can borrow overnight at a penalty rate. The Bank Rate is also 5.75%.

You will also hear of the reverse repo rate. It still exists, but since the SDF was introduced in April 2022, the SDF has done its job as the floor, so the reverse repo matters far less than it once did.

Who decides the repo rate, and how?

Since 2016, the repo rate has been set by the Monetary Policy Committee, created by an amendment to the RBI Act. It has six members:

• three from the RBI, including the Governor, who chairs it and has a casting vote in a tie;
• three external members appointed by the central government.

The law requires the MPC to meet at least four times a year. In practice it meets six times, about every two months, over three days. The decision is announced on the last day at 10 am, followed by a press conference. The minutes, showing how each member voted and why, come out two weeks later. For the October 2026 meeting, they are due on October 21.

The MPC's job is defined by law: keep consumer price inflation at 4%, with a tolerance band of 2% to 6%, while keeping growth in mind. If inflation threatens to rise, the committee raises rates to cool demand. If the economy is weak and inflation is calm, it cuts rates to encourage borrowing and spending.

The committee also announces a stance, a signal of where it is leaning. In October 2026 it changed the stance from "neutral" to "calibrated tightening", which tells markets that the next move is more likely a hike or a pause than a cut. The rate decision was unanimous, but two external members, Nagesh Kumar and Ram Singh, preferred to keep the neutral stance.

Why did the RBI raise the rate in October 2026?

In one word: inflation. Consumer prices rose 4.8% in August, above the 4% target, and higher oil prices were feeding into transport and food costs. After the meeting, the statistics ministry reported that inflation jumped to 5.54% in September, with food inflation at 7.74%.

The RBI now expects inflation to average 5.2% in 2026-27, and to touch 6.0% in the October to December quarter. Its growth forecast for the year is 7.1%, strong enough that it felt it could tighten without hurting the economy badly. You can read the full decision in our report, RBI hikes repo rate to 5.5%, and see how markets reacted in Sensex sheds 1,045 points.

How has the repo rate moved in recent years?

A short history helps to show that rates move in cycles, not in one direction:

• February 2023: raised to 6.5% to fight post-pandemic inflation, and held there for two years.
• February to June 2025: cut three times, to 5.5%, as inflation fell.
• December 2025: cut again to 5.25%.
• October 2026: raised back to 5.5%.

If you took a floating-rate home loan in 2025, you enjoyed falling EMIs. In late 2026, that trend has reversed.

How does the repo rate reach my home loan EMI?

Since October 1, 2019, the RBI has required banks to link new floating-rate retail loans, including home loans and loans to small businesses, to an external benchmark. Most banks chose the repo rate. Your loan rate is then simply:

Repo rate + the bank's spread = your interest rate.

The spread is fixed when you take the loan and depends on your credit score, loan size and the bank. When the repo rate rises by 0.25 percentage points, your rate rises by the same amount at your next reset date, which banks must set at least once every three months. That is why state-run banks raised their repo-linked lending rates by 25 basis points on October 8, a day after the hike. Bank of Baroda's repo-linked rate went to 8.15%, Business Standard reported.

Older loans may still be linked to a bank's MCLR (marginal cost of funds based lending rate), which moves more slowly and resets less often, typically every six or twelve months. Check your loan sanction letter to see which benchmark applies to you.

What does a 0.25 point hike cost?

We worked out two examples:

• ₹50 lakh over 20 years: rate 7.90% → 8.15%; EMI ₹41,511 → ₹42,290, about ₹780 more a month.
• ₹30 lakh over 15 years: rate 8.00% → 8.25%; EMI ₹28,670 → ₹29,104, about ₹435 more a month.

Many banks do not raise your EMI. Instead, they quietly extend your tenure. On the ₹50 lakh loan above, keeping the EMI at ₹41,511 after the hike stretches a 20-year loan from 240 months to about 252 months, roughly a year of extra payments. Over the full loan, total interest rises from about ₹49.6 lakh to about ₹54.5 lakh. Raising the EMI to ₹42,290 instead keeps the 20-year term and limits total interest to about ₹51.5 lakh, so if you can afford it, asking your bank to raise the EMI usually saves money.

Fixed-rate loans, such as most car loans and personal loans, do not change mid-way. But new fixed-rate loans are usually priced higher after a hike.

Should I prepay my home loan now?

It depends on your situation, but a few principles help:

• Keep an emergency fund first. Three to six months of expenses in an easy-to-reach account comes before any prepayment.
• Small prepayments early in a loan have a big effect, because most of the early EMIs go towards interest.
• Compare the loan rate with what your money could earn safely. If your loan costs 8.15% and an FD earns 6.5% before tax, prepaying often wins for a cautious borrower.
• Floating-rate home loans taken by individuals carry no prepayment penalty under RBI rules, but check for any fees on other loans.
• Ask for a lower spread. If your credit score has improved since you took the loan, many banks will reduce your spread for a small fee. Switching lenders is another option if the gap is large.

We are preparing a full guide with more worked examples, listed under "Coming soon" below.

Why didn't FD rates go up with the repo rate?

Savers often expect deposit rates to rise as soon as the RBI raises the repo rate. That rarely happens, for a simple reason: banks raise deposit rates only when they need more deposits.

After the October hike, SBI's chairman said banks had sufficient liquidity and he did not expect deposit rates to change for two to three months. Some non-bank lenders moved faster. Our guide to FD rates after the repo hike lists current rates at large banks and explains how an FD ladder, splitting money across deposits that mature at different times, lets you benefit if rates do rise later.

The general pattern is worth remembering:

• Loan rates react fast because most loans are linked to the repo rate by rule.
• Deposit rates react slowly and only when banks compete for money.
• When rates are falling, the opposite happens: deposit rates can drop before loan rates. Locking in a longer FD near the top of a cycle can pay off, but nobody can be sure when the top has come.

Your bank deposits are insured up to ₹5 lakh per depositor per bank by the DICGC, whatever the repo rate.

What about PPF, Sukanya Samriddhi and post office schemes?

Small savings rates are not linked to the repo rate. The finance ministry sets them every quarter, based loosely on government bond yields. For October to December 2026, every rate was left unchanged for the tenth quarter running: PPF at 7.1%, Sukanya Samriddhi at 8.2%, Senior Citizens' Savings Scheme at 8.2% and NSC at 7.7%, as reported by Outlook Money.

That means, for now, many post office schemes pay more than bank FDs of similar length, with a sovereign guarantee. See our full table and worked examples in PPF, SSY and small savings rates for October-December 2026. The next review is due at the end of December.

Does the repo rate affect credit cards, EMIs on gadgets and BNPL?

Only a little. Credit card interest in India is already very high, often 36% to 45% a year, and is not linked to the repo rate. A 0.25 point change makes no practical difference. The real cost of card debt comes from carrying a balance at all.

"No-cost EMI" offers in festive sales are also mostly unaffected by small repo moves, because the seller covers the interest with a discount. But GST on the interest and processing fees remain. Our worked example in Is no-cost EMI really free? shows how much extra you may pay.

How does the repo rate affect the stock market and SIPs?

Higher rates tend to weigh on share prices in the short term, for three reasons:

1. Borrowing costs rise for companies, squeezing profits, especially in sectors that rely on loans, such as real estate and carmakers.
2. Safe returns become more attractive. When FDs and bonds pay more, some money moves away from shares.
3. Future profits are worth less today when interest rates are higher, which lowers valuations.

That is why shares fell after the October announcement. But markets respond to many things at once, including oil prices, foreign investors and company results, so the repo rate is only one piece. For long-term investors in mutual fund SIPs, a single rate move is rarely a reason to stop investing. A dedicated "SIP vs FD" comparison is in our list of upcoming guides below. For how new companies come to the market, see our explainer on how an IPO works in India.

What about bond funds and debt mutual funds?

When interest rates rise, the prices of existing bonds fall, because new bonds pay more. Debt mutual funds that hold long-term bonds can therefore show losses after a hike, while funds holding short-term bonds are hit less and then start earning higher yields. If you hold debt funds, check their average maturity. The longer it is, the more sensitive the fund is to rate changes.

Does the repo rate affect gold prices?

Not directly. Indian gold prices follow international prices and the rupee. Higher interest rates in the US tend to pressure gold because gold pays no interest, and a weaker rupee makes gold costlier in India. With gold around ₹1.5 lakh per 10 grams this festive season, our Dhanteras 2026 gold buying guide covers making charges, hallmarking and safer alternatives to jewellery.

Does the new Income-tax Act change anything for interest income?

The rate of tax you pay depends on your slab, not on the repo rate. But from April 1, 2026, India's tax law changed: the Income-tax Act, 2025 replaced the 1961 Act, and the "assessment year" became the "tax year". FD interest, debt fund gains and loan-interest deductions are all now governed by the new Act's sections. Our explainer, the new Income-tax Act, 2025, sets out what changed and what did not.

Repo rate, CRR, SLR: what is the difference?

The RBI has several tools. These are the ones you will see in headlines:

• Repo rate: the price of short-term money for banks. The main signal of policy.
• Cash Reserve Ratio (CRR): the share of deposits banks must keep with the RBI as cash, earning nothing. Cutting it releases money for lending; raising it absorbs money.
• Statutory Liquidity Ratio (SLR): the share of deposits banks must hold in safe assets such as government bonds.
• Open market operations: the RBI buying or selling government bonds to add or remove money from the system.

The repo rate changes the price of money. CRR, SLR and open market operations mostly change the amount of money. The RBI often uses them together.

Will the RBI raise rates again in December?

Nobody knows yet, and the RBI itself says its next step will depend on the data. What we do know:

• The Governor said rate cuts are off the table in the near term; the next move could be a hike or a pause.
• September inflation, at 5.54%, came in above the RBI's own forecast for the quarter.
• Oil prices and the rupee will matter a great deal over the next two months.

The October inflation figure, due in mid-November, and the meeting minutes on October 21 will give better clues. We will update this page after the December 2 to 4 meeting.

A simple checklist for borrowers and savers

If you have a home loan:

1. Find out whether it is linked to the repo rate or MCLR, and your next reset date.
2. Check whether your bank has raised the EMI or the tenure.
3. Consider a small prepayment if you have spare savings beyond an emergency fund.
4. Ask for a lower spread if your credit score has improved.

If you are saving:

1. Compare FD rates with post office schemes, which currently pay more for many tenures.
2. Spread large sums across banks to stay within the ₹5 lakh insurance limit.
3. Consider an FD ladder instead of locking everything in at once.
4. Remember that FD interest is taxed at your slab rate.

Guides in this series

This page is the starting point for our money explainers. Read on by topic.

Borrowing

• Is no-cost EMI really free? A worked example

Saving

• Will FD rates rise after the RBI's repo hike?
• PPF, Sukanya Samriddhi and NSC rates for October-December 2026

Gold

• Dhanteras 2026: smart ways to buy gold

Tax

• The new Income-tax Act, 2025, explained

Related news

• RBI raises repo rate to 5.5% in first hike since 2023
• Sensex sheds 1,045 points as oil and foreign selling hit markets
• EPF money via UPI: EPFO is testing instant withdrawals

Coming soon

• Home loan EMI after a repo hike: worked examples
• Credit score explained: what moves your CIBIL score
• SIP vs FD: which is better when rates rise?
• How to verify gold HUID on the BIS Care app
• Gold purity tests at home: which ones work
• Income Tax Act 2025: old and new section numbers
• Muhurat trading 2026: date and timing

This guide is for information only and is not financial advice. Rates change often; check with your bank or the official source before you act.