RBI raised its repo rate to 5.5% on Wednesday, its first hike since February 2023, as the Monetary Policy Committee reacted to stronger growth and rising inflation sparked by the West Asia conflict. The 25‑basis‑point move will increase the monthly EMI on a ₹1 crore, 15‑year home loan by about ₹1,500, adding roughly six months to the repayment period. Deposits will see higher yields within weeks as banks adjust rates to reflect the new benchmark.
Governor Sanjay Malhotra told reporters that rate cuts are off the table in the near term and that policy action will be limited to a hike or a pause depending on evolving conditions. He said the RBI has shifted from a neutral stance to ‘calibrated tightening’ to keep inflation in check.
SBI Chairman CS Setty said the hike reflects the RBI’s confidence in the economy’s resilience while acknowledging supply‑side pressures. Group chief economist Soumya Kanti Ghosh projected that inflation could peak at 6.8% in November 2026, leading to a potential repo rate cap of around 6% by December.
Bajaj Finance has already raised its fixed‑deposit rates by up to 40 basis points, lifting senior‑citizen rates to 8.15%. Banks are expected to revise their own deposit offerings in the coming weeks as they absorb the surplus from the special NRI deposit scheme.
The RBI also nudged its 2026‑27 real GDP growth forecast up to 7.1% and raised this year’s inflation estimate to 5.2%, with core inflation now at 4.4%. The MPC expects inflation to average 5.8% over the next three quarters.
Banks will roll out the new repo‑rate‑driven changes in deposit and loan products over the next ten days, while the RBI will monitor the cooling of inflation before deciding on a further hike. Consumers can expect to see updated loan statements and deposit rates by the end of the month.