What is the impact of 25 basis points repo rate hike on borrowers? | Explained
The Reserve Bank of India's Monetary Policy Committee has increased the repo rate by 25 basis points to 5.50% to manage liquidity. This hike is expected to lead to higher interest rates for bank borrowers as financial institutions pass on the increased cost of funds.
Why it matters
Interest rate hikes directly impact the cost of living and business operations by increasing loan repayment burdens for consumers and corporations.
Story so far: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday (October 7, 2026 ) voted unanimously to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 bps to 5.50%. Consequently, the standing deposit facility (SDF) rate stands adjusted at 5.25% and the marginal standing facility (MSF) rate and the Bank Rate at 5.75%.
The policy Repo rate which was cut to 5.25% in December 2025 had been put on hold in the next 4 MPC meetings . In the rate cut cycle the MPC had cut the rate by 125 basis points in phases from 6.5% to 5.25% before increasing it on Wednesday (October 7, 2026). The previous big rate hold cycle was 11 times at 6.50% from Apr 2023 to December 2024.
When RBI raises repo rate (the rate at which RBI lends to banks), money becomes expensive.
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