The RBI's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% and shifted to a 'calibrated tightening' stance to control inflation while maintaining growth at 7.1% for FY 2026-27. CPI inflation is projected at 5.2% for the fiscal year.
RBI Raises Repo Rate to 5.50%, Adopts Calibrated Tightening
The Reserve Bank of India (RBI) has raised the repo rate by 25 basis points to 5.50%, effective immediately, as part of its October 2026 monetary policy review. The Monetary Policy Committee (MPC) unanimously adopted a 'calibrated tightening' stance to manage inflationary pressures while sustaining economic growth.
For FY 2026-27, the RBI projected GDP growth at 7.1% and CPI inflation at 5.2%, citing persistent food inflation and elevated fiscal outlays as key concerns. The calibrated approach signals that future rate hikes will be data-dependent, with emphasis on inflation anchoring. Accompanying the rate hike, the RBI raised the daily minimum Cash Reserve Ratio (CRR) maintenance from 90% to 99% under Section 42(1) of the RBI Act, effective 16 October 2026.
This move will directly impact corporate borrowing costs, particularly external commercial borrowings (ECBs), loan covenants, and treasury operations. Legal and financial teams should reassess debt serviceability, FEMA compliance for forex exposures, and hedging strategies in light of tighter monetary conditions and enhanced CRR requirements.