07 October,2026 12:25 PM IST | Mumbai | mid-day online correspondent
RBI. File pic.
After nearly three-and-half years, the Reserve Bank of India on Wednesday raised its key policy rate by 25 basis points to 5.5 per cent amid geopolitical tensions in West Asia, global trade uncertainties, elevated crude oil prices and inflationary pressures.
In his address, RBI Governor Sanjay Malhotra said given the current conditions, rate cuts are off the table in the near term and the apex bank changed its policy stance to 'calibrated tightening.'
GDP: India's real GDP growth projected at 7.1 per cent for FY 2026-27, an upward revision of 40 basis points.
Inflation: CPI inflation for 2026-27 is projected to be 5.2 per cent with Q2 at 4.9 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent. Inflation for Q1:2027-28 is projected at 5.6 per cent with risks being evenly balanced. Core inflation is projected at 4.4 per cent for 2026-27.
Repo rate: The RBI increased the repo rate to 5.5 per cent. The first rate hike since February 2023. RBI had kept the rates unchanged at 5.25 per cent since December 2025.
Policy stance: The MPC changed its monetary policy stance to calibrated tightening. Given the current conditions, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on the evolving conditions and the outlook.
Standing deposit facility (SDF): Adjusted to 5.25 per cent from 5 per cent earlier.
Marginal standing facility (MSF) rate: Revised to 5.75 per cent from 5.50 earlier.
Bank rate: Bank Rate was also revised to 5.75 per cent from 5.50 per cent earlier.
Balance of Payment: India's Balance of Payments is expected to record a health surplus in FY27.
EMIs: For existing loan borrowers, the RBI's announcement of raising the repo rate means that EMIs will increase, if the borrower has opted for the floating rate loan linked to the external benchmark such as repo rate.
Loan Borrowers: The rate hike of 25 basis points will mean that home loans, vehicle loans and corporate loans would become expensive.
Fixed deposit investors: The rates on the fixed deposit depends on a bank's profit margins and it will be up to a bank's discretion to increase the FD rates and the quantum by which it wants to increase the rates.
