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RBI Raises Repo Rate by 25 Basis Points to 5.50%

7 October 2026

15:30

Mumbai: The Reserve Bank of India (RBI) has increased the repo rate, which is the interest rate at which it lends money to banks, from 5.25% to 5.50%. The RBI has taken this step because prices of goods and services are rising, and it wants to control inflation. This is the first time the RBI has increased the repo rate since February 2023.

In 2025, the RBI cut the repo rate multiple times to make borrowing money cheaper. The total cut was 1.25 percentage points. After that, the RBI kept the rate at 5.25% for some time. Now, the RBI has changed its decision and raised the rate to 5.50%.

The RBI’s decision did not come as a surprise to the financial market. Most economists surveyed by Reuters had expected a 25-basis-point increase in the repo rate, and investors had already factored in much of the expected hike.

The RBI has taken this decision as inflationary pressures spread beyond food prices. The RBI now has to worry about more than just rising food prices, as prices of many other things are also going up. At the same time, crude oil has become more expensive, the Indian rupee has become weaker, and interest rates in global bond markets have gone up. All these things can make it harder for the RBI to control inflation.

The financial experts said the RBI’s 25-basis-point rate hike is a sensible step to control inflation. “With crude oil prices above $100, a weaker rupee and rising prices beyond food, the RBI has acted early instead of waiting for these pressures to push inflation higher. The RBI has also kept its 7.1% growth forecast, showing confidence that the rate hike will not hurt economic growth significantly,” they added.