RBI Hikes Repo Rate to 5.5% Amid Stronger Growth and Price Pressures
Key Highlights
- RBI raises repo rate by 25 basis points to 5.5%.
- EMI on Rs 1 crore loan over 15 years to increase by Rs 1,500 a month.
- RBI raises 2026-27 real GDP growth forecast to 7.1%.
The Reserve Bank of India (RBI) raised the repo rate by a widely expected 25 basis points to 5.5% on Wednesday, its first increase since February 2023, as stronger-than-expected growth and broader price pressures due to the escalation of the West Asia conflict prompted the Monetary Policy Committee to unanimously vote for an increase and shift its stance from neutral to "calibrated tightening".
The move will raise the EMI on a Rs 1 crore loan over 15 years by around Rs 1,500 a month. Or about Rs 1,471 at a base rate of 8.5%. If EMI remains unchanged, the higher rate could extend the loan by about 5.5 to 5.9 months, equivalent to six additional instalments.
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Clarifying that the calibrated tightening was an indication of future actions, RBI governor Sanjay, Malhotra said., "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."
| Financial Metric | Reported Value |
|---|---|
| Percentage Shift | 5.5% |
| Financial Volume / Value | Rs 1 crore |
| Brent Crude Rate | $116 per barrel |
According to SBI chairman CS Setty, the repo rate hike is both a response to inflation and a recognition of the resilience of the Indian economy. "The upward revision in the growth outlook is reassuring, even as geopolitical developments and supply-side pressures including elevated energy prices warrant continued close monitoring," he said.
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While banks are expected to take a few weeks to revise their fixed deposit rates as they are flush with funds from the special NRI deposit scheme, Bajaj Finance revised its FD rates by up to 40 basis points, taking rates for senior citizens up to 8.15%.
RBI raised its 2026-27 real GDP growth forecast by 40 basis points from the August review to 7.1%. Driven largely by a sharp revision in Q2 growth to 7.2% from 6.4%. The Q3 forecast was also raised, while the Q4 projection was unchanged.
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I write about the forces shaping business and the global economy, from startup growth and changing markets to international trade and policy. My work focuses on breaking down complex developments into clear, practical insights and understanding what they could mean for businesses, investors, and the wider economy.
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