The Monetary Policy Committee increased the policy repo rate by 25 basis points to 5.50% under the Liquidity Adjustment Facility, effective immediately.
RBI Tightens Monetary Policy: Repo Rate Hiked to 5.50%
On October 7, 2026, the Monetary Policy Committee (MPC) decided to increase the policy repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.25% to 5.50% with immediate effect, as announced in the bi-monthly Monetary Policy Statement. The hike reflects the RBI’s stance on controlling inflation while supporting growth.
The reverse repo rate remains aligned with the policy trajectory. The LAF rate adjustment influences short-term interest rates across the financial system, affecting bank borrowing costs, lending rates, and bond market yields. The move signals a tightening bias amid evolving macroeconomic conditions.
Implication for practitioners: Financial institutions must reassess asset-liability management, pricing models, and interest rate risk in trading books. Corporate clients may face higher borrowing costs, necessitating advisory input on refinancing and hedging strategies.
Citations
- RBI/2026-27/282, FMOD.MAOG.No.154/01.01.001/2026-27