RBI raises repo rate by 25 basis points to 5.50%

07-10-2026 · English

Topics: Economy · 7 October 2026 Current Affairs (UPSC / TNPSC / SSC / RRB)

News

On 7 Oct 2026 the Monetary Policy Committee (MPC) led by Governor Sanjay Malhotra unanimously raised the repo rate by 25 basis points from 5.25% to 5.50% – the first hike since February 2023. The stance moved from 'neutral' to 'calibrated tightening'. Reasons: volatile crude prices after the West Asia conflict flared up again, and energy- and food-driven inflation.

Key facts

Background

• Repo rate is the rate at which the RBI lends short-term to banks against government securities. SDF is the rate at which it absorbs banks' surplus without collateral (floor of the corridor); MSF is emergency borrowing (ceiling).
• 1 basis point = 0.01%, so 25 bps = 0.25%. A repo hike raises loan rates and EMIs, cools demand and curbs inflation (contractionary policy).
• MPC: RBI Act 1934, Section 45ZB (2016 amendment); 6 members – 3 from the RBI including the Governor and 3 external members named by the Centre; the Governor has a casting vote; at least 4 meetings a year.
• Inflation target: CPI 4% (±2%), set by the Central Government in consultation with the RBI.
• History: on the Hilton Young Commission's (1926) advice the RBI began on 1 April 1935, first in Kolkata and in Mumbai from 1937; nationalised on 1 Jan 1949. Sanjay Malhotra is the 26th Governor (Dec 2024).

Tamil Nadu link: Dr C. Rangarajan, born in Tiruchirappalli, was RBI Governor (1992–97) and later chaired the PM's Economic Advisory Council. The RBI has a regional office in Chennai.

Source: Business Standard, ETV Bharat, 7 Oct 2026

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