Quick Answer
Repo rate is the interest rate at which the Reserve Bank of India (RBI) lends short-term money to commercial banks, against government securities. The current repo rate in India is 5.50%, after the RBI’s Monetary Policy Committee raised it by 25 basis points from 5.25% on 7 October 2026. It is the first hike since February 2023. A higher repo rate raises the cost of funds for banks, which usually pushes up interest rates on new loans and on floating-rate loans linked to it.
Introduction
Repo rate is back in the headlines because the RBI has changed direction. After four rate cuts in 2025 and a long pause, the central bank raised the repo rate on 7 October 2026 and moved to a stance it calls calibrated tightening. If you have a home loan, a car loan, a personal loan or a fixed deposit, that decision matters to you, even if the change shows up slowly.
This guide explains the repo rate meaning in plain terms, shows the current repo rate in India, lists how repo rates have moved recently, and walks through what a change means for your EMI, your savings and your next borrowing decision.
What Is Repo Rate?
Repo rate is the policy interest rate at which the RBI lends money to banks for a short period, usually overnight. “Repo” is short for repurchase agreement. A bank that needs funds sells government securities to the RBI and agrees to buy them back on a fixed date at a pre-agreed price. The difference between the two prices is the interest, and the annual rate on it is the repo rate.
In simple terms, the repo rate is what banks pay when they borrow from the RBI. Because it sets the base cost of money in the banking system, it influences almost every other interest rate in the economy.
Current Repo Rate in India (October 2026)
The current repo rate in India is 5.50%. The RBI’s six-member Monetary Policy Committee (MPC) voted unanimously on 7 October 2026 to raise it by 25 basis points from 5.25%. One basis point is one hundredth of a percentage point, so 25 basis points is 0.25%.
| Policy rate | Current level | What it means |
| Repo rate | 5.50% | Rate at which RBI lends to banks |
| Standing Deposit Facility (SDF) rate | 5.25% | Rate RBI pays banks for parking surplus funds; floor of the rate corridor |
| Marginal Standing Facility (MSF) rate | 5.75% | Rate for emergency overnight borrowing by banks; ceiling of the corridor |
| Bank Rate | 5.75% | Rate used for penalties on shortfalls in reserve requirements |
| Policy stance | Calibrated tightening | Signals that rate cuts are unlikely in the near term |
| Next MPC meeting | 2 to 4 December 2026 | Next scheduled review of the repo rate |
The RBI pointed to strong, broad-based economic activity. Its inflation projection for FY27 is about 5.2%, above the 4% target it works to, within a tolerance band of 2% on either side.
Repo Rates in India: Recent History
Repo rates in India have moved through a full cycle in a short time. The RBI cut rates through 2025 to support growth when inflation was low, held steady for a while, and has now reversed course.
| Date | Change | Repo rate after change |
| February 2023 | Increased by 25 bps | 6.50% |
| February 2025 | Reduced by 25 bps | 6.25% |
| April 2025 | Reduced by 25 bps | 6.00% |
| June 2025 | Reduced by 50 bps | 5.50% |
| December 2025 | Reduced by 25 bps | 5.25% |
| 7 October 2026 | Increased by 25 bps | 5.50% |
How Does Repo Rate Work?
The RBI uses the repo rate to control how much money flows through the economy. The process works in three steps.
Step 1: Banks borrow when they run short
When a bank needs short-term funds, it borrows from the RBI by pledging government securities, and pays interest at the repo rate.
Step 2: A higher rate makes that borrowing costly
When the RBI raises the repo rate, banks pay more for funds. They tend to pass this on by raising lending rates, which slows borrowing and spending and helps bring inflation down.
Step 3: A lower rate does the opposite
When the RBI cuts the repo rate, funds cost banks less. Loans become more affordable, borrowing picks up, and economic activity gets a push, which is useful when growth is slow.
Who Decides the Repo Rate in India?
The repo rate is decided by the Monetary Policy Committee, not by a formula. The MPC has six members: three from the RBI, including the Governor, and three external members appointed by the government. It meets at least four times a year, and decisions are taken by majority vote. The Governor, Sanjay Malhotra, announces the outcome.
The MPC looks at inflation, economic growth, credit conditions, global developments and financial market stability. Its legal mandate is to keep consumer price inflation at 4%, within a band of 2% to 6%, while supporting growth.
Why Is Repo Rate Important?
It controls inflation
Raising the repo rate reduces spending and borrowing, which eases price pressure. Lowering it has the opposite effect.
It supports growth
In a slowdown, a lower repo rate encourages banks to lend and businesses to invest. In a strong economy, a higher rate stops demand from overheating.
It acts as a benchmark
Banks and lenders use the repo rate as a reference point for loan and deposit rates, so a change flows through to home loans, car loans, business loans and fixed deposits.
It manages liquidity
The RBI uses repo operations to add money to the banking system or take it out, depending on what the economy needs.
How Does Repo Rate Affect Your Loan EMI?
The effect depends on the type of loan you have.
Floating-rate loans react directly
Banks link most floating-rate retail loans, such as home loans, to an external benchmark like the repo rate. When the repo rate rises, the lending rate rises, and lenders reset the rate at least once every three months. You then see either a higher EMI or a longer tenure.
Fixed-rate loans do not change mid-way
Most personal loans from banks and NBFCs carry a fixed rate for the full tenure. A repo rate hike does not change the EMI on a loan you already have. It shows up in the rate offered on new loans instead.
Here is an illustration for a floating-rate home loan, assuming the lender passes the full 25 basis point increase through to the borrower.
| Loan details | Before the hike | After the hike |
| Loan amount and tenure | Rs. 50 lakh, 20 years | Rs. 50 lakh, 20 years |
| Interest rate | 8.50% | 8.75% |
| Monthly EMI | Rs. 43,391 | Rs. 44,186 |
That is about Rs. 795 more every month, or roughly Rs. 1.9 lakh over the full tenure, if the rate stays at the new level. The figures are illustrative and use a standard EMI formula.
You can test your own numbers with the EMI calculator To understand what sets the rate on an unsecured loan, read how interest rates on personal loans are decided.
How Does Repo Rate Affect Savings and Fixed Deposits?
A higher repo rate generally leads banks to raise deposit rates over time, because their own cost of funds goes up and they compete for deposits. Savers with new or maturing fixed deposits may be able to lock in better rates. Banks do not move at the same speed, so it is worth comparing rates before you book a deposit.
What Should Borrowers Do After the Repo Rate Hike?
- Check whether your existing loan is floating or fixed, and what your lender’s reset date is.
- If you plan to borrow soon, compare offers from more than one lender, since pricing on new loans can change quickly after a hike.
- Keep your credit score healthy. Lenders still price individual borrowers differently, and a strong score helps you get a better rate whatever the repo rate is.
- Do not delay an urgent need in the hope of a cut. The RBI has moved to calibrated tightening, and the next review is on 2 to 4 December 2026.
Conclusion
The repo rate is the RBI’s main tool for managing inflation and growth. At 5.50%, it now sits 25 basis points higher than before the October 2026 decision, and the RBI has signalled that cuts are not on the near-term agenda. For borrowers, the practical effect depends on whether your loan is floating or fixed.
Most personal loans carry a fixed rate, so the EMI on an existing loan stays the same, while a new personal loan may be priced higher than it was a few months ago. If you are planning to borrow, compare personal loan interest rates across lenders and work out the EMI before committing.
Frequently Asked Questions
What is the current repo rate in India?
The current repo rate in India is 5.50%. The RBI’s Monetary Policy Committee raised it by 25 basis points from 5.25% on 7 October 2026, the first increase since February 2023.
When will the repo rate change next?
The next RBI Monetary Policy Committee meeting is scheduled for 2 to 4 December 2026. The repo rate can change at that meeting, but the RBI has moved to a calibrated tightening stance, which signals that cuts are unlikely in the near term.
Who decides the repo rate in India?
The six-member Monetary Policy Committee of the RBI decides the repo rate. It has three RBI members, including the Governor, and three external members, and it decides by majority vote.
Why did the RBI increase the repo rate in October 2026?
The RBI raised the repo rate to keep inflation in check while the economy is growing strongly. Its projection for FY27 inflation is about 5.2%, above the 4% target, so the MPC chose to tighten policy.
What Is the Difference Between the Repo Rate and the Reverse Repo Rate?
The repo rate is the interest rate banks pay when they borrow money from the RBI, while the reverse repo rate is the interest rate the RBI pays banks for keeping their extra money with it. In simple terms, the repo rate is for borrowing money, and the reverse repo rate is for depositing extra money with the RBI.
Does the repo rate affect personal loan interest rates?
Yes, indirectly. Most personal loans carry a fixed rate, so a hike does not change the EMI on an existing loan. Lenders may price new personal loans higher after a hike because their own cost of funds rises.
What is the difference between repo rate and reverse repo rate?
The repo rate is what banks pay to borrow from the RBI, currently 5.50%. The reverse repo rate is what the RBI pays banks to park surplus funds with it, and the fixed reverse repo rate is 3.35%.
Does the repo rate affect fixed deposit rates?
Yes. When the repo rate rises, banks generally raise fixed deposit rates over time to attract deposits, although each bank moves at its own pace.
What happens if the repo rate increases?
When the repo rate increases, banks have to pay more interest to borrow money from the RBI. As a result, they may increase interest rates on home loans, personal loans and other borrowings. This makes loans more expensive, which can reduce borrowing and spending.
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