The Reserve Bank of India (RBI), on October 7, 2026, increased the policy repo rate under the Liquidity Adjustment Facility (LAF) from 5.25% to 5.50% with immediate effect. The decision, taken by the Monetary Policy Committee (MPC), aims to recalibrate monetary stance in response to evolving inflationary pressures.
RBI Raises Repo Rate by 25 Basis Points
On October 7, 2026, the Reserve Bank of India (RBI) announced a 25 basis point increase in the policy repo rate under the Liquidity Adjustment Facility (LAF) from 5.25% to 5.50%, effective immediately. The decision follows the Monetary Policy Committee’s (MPC) review of macroeconomic indicators and inflation trends.
The RBI stated that the rate hike is part of its calibrated approach to ensure inflation remains within the target band while supporting sustainable economic growth. The MPC assessed that persistent inflationary pressures, particularly in food and fuel segments, warranted a tightening of monetary policy.
This adjustment impacts short-term liquidity conditions and borrowing costs across financial markets. Banks and financial institutions are expected to reprice loans and deposits in line with the new benchmark. The move signals a shift toward a more hawkish monetary stance, which may influence corporate borrowing and investment decisions in the near term.
Market participants should monitor forthcoming RBI communications for further indications on the duration and magnitude of the tightening cycle. The next MPC meeting is scheduled for December 2026.