Business Desk- RBI Repo Rate: The three-day meeting of the Monetary Policy Committee (MPC) of RBI has started today i.e. from October 5. Experts believe that this time the Reserve Bank may increase the repo rate by 0.25%.
If this happens, this will be the first increase in the repo rate after February 2023. After this the repo rate will increase from 5.25% to 5.50%. RBI Governor Sanjay Malhotra will give information about the decisions taken in the MPC meeting on October 7.
Rates held steady after four meetings after 1.25% cut in 2025
The Reserve Bank had reduced the repo rate four times in 2025 by a total of 1.25%. Due to this the repo rate came down from 6.50% to 5.25%. At the same time, no change has been made in the repo rate in the four MPC meetings held so far in 2026.
Loan cost may increase during festive season
The October MPC meeting is taking place at a time when the peak festive season is going on in the country. During this period, demand for loans increases in sectors like automobile, electronics and housing.
If RBI increases the repo rate by 0.25%, the External Benchmark Lending Rates (EBLR) of banks may increase. This will make new loans expensive. At the same time, EMI of existing home loan and auto loan may also increase. This may affect customers’ purchases during the festive season.
FD also affected due to increase in repo rate
When the repo rate increases, it becomes expensive for banks to take money from RBI. This may affect the loan of customers. EMI may increase due to increase in interest rates on home loan, car loan and personal loan.
On the other hand, banks can also increase FD interest rates to attract more deposits. This means that the increase in repo rate can affect not only the loan takers but also those who deposit money in the bank.
What is repo rate?
Repo rate is the interest rate at which RBI lends money to banks. When the repo rate increases, it becomes expensive for banks to take loans from RBI. Banks can pass on the impact of its cost to the customers.
Due to this, home loan, car loan and personal loan can become expensive. At the same time, banks can also increase FD rates to attract depositors.
Why does RBI increase or decrease the repo rate?
Repo rate is a major tool of RBI to control inflation. When inflation is high, the central bank tries to reduce the flow of money in the economy by increasing the repo rate. This makes loans expensive, may reduce demand and may help in reducing pressure on inflation.
On the contrary, when there is a need to boost demand and growth in the economy, RBI can reduce the repo rate. This makes it cheaper for banks to take loans and also increases the chances of customers getting loans at lower interest rates.