The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.50% on October 7, after its Monetary Policy Committee met from October 5 to 7 under Governor Sanjay Malhotra. The committee also changed its stance from "neutral" to "calibrated tightening", signalling that rate cuts are off the table for now.

Why the RBI raised rates

Retail inflation rose to 4.8% in August from 4.5% in July. The RBI now projects consumer inflation of 5.2% for 2026-27 and expects it to average almost 5.8% over the next three quarters. It cited higher food and fuel prices, crude-oil volatility, geopolitical tensions and a deficient monsoon. Growth is still forecast at a healthy 7.1% for the year.

How it reaches your home loan

Most new floating-rate home loans in India are linked to an external benchmark, usually the repo rate. When the repo rate rises, lenders reset these loans upward at their next reset date. Borrowers typically see either a higher EMI or, more commonly, a longer remaining tenure at the same EMI.

What borrowers can do

  • Check your loan's benchmark and reset date in your sanction letter or the bank's app.
  • If your lender extends the tenure, ask whether you can raise the EMI instead; this usually lowers total interest paid.
  • Part-prepayments made early in a loan's life cut interest the most.

What it means for the property market

Knight Frank India had already warned in its nine-month housing report that inflation limits further easing, and that demand will depend more on income growth and supply. Affordable housing, where sales were already falling, is the most rate-sensitive segment.

The RBI's next policy meeting is scheduled for December 2–4.