Your home auto loans may become costlier:Will RBI increase repo rate after more than 3 years?

The Reserve Bank of India (RBI), governor, Sanjay Malhotra, is all set to deliver his decision on repo rate as the Monetary Policy Committee’s (MPC) three-day meet concluds on Wednesday, 6 October, 2026. According to most analysts, the apex bank can increase the repo rate by 25 basis points (bps) or 0.25%. This may be the first repo rate hike initiated by the top bank in more than the last three years. Experts view: Tata Asset Management: The Indian bond market is pricing in a repo rate hike of 25 basis points and a temporary CRR hike of 50 basis points in the monetary policy announcement on 7 October 2026. ICICI Bank: RBI is seen beginning a rate-hike cycle that could take the repo rate to 6% by the end of FY27, as rising inflation, elevated global yields and resilient domestic growth strengthen the case for tighter monetary policy. Union Bank of India: Union Bank of India expects the RBI to raise the repo rate by 25 basis points in October and deliver further hikes in FY27, potentially taking the rate to 5.75-6%. Repo rate trajectory since Feb 2023 The Reserve Bank cut the repo rate by 1.25% on four occasions in 2025, taking it from 6.50% to 5.25%. The repo rate has remained unchanged in all four meetings held so far in 2026. The top bank had jumped upon the rate-slashing trajectory in February 2025 after it had held up the rates steady at 6.50% for the preceding two years. Before February 2025, the rate-setting committee had last revised the rates in February 2023 when it had increased the policy rate from 6.25% to 6.50%. Repo rate then remained unchanged for four consecutive meetings after a 1.25% cut in 2025. RBI’s decision may impact festive season spending The October meeting is being held during the country’s peak festive season. During this period, demand for credit, or loans, is higher in the automobile, electronics and housing segments. If the RBI raises the repo rate by 0.25%, banks’ external benchmark lending rates (EBLRs) will rise immediately. This will make new loans more expensive and could increase the EMIs of existing home-loan and auto-loan customers, potentially affecting consumer demand during the festive season. What is the repo rate, and how does it affect you? What is the repo rate? The repo rate is the rate at which the country’s central bank, the RBI, lends money to the country’s banks. What happens when it is raised? As soon as the repo rate rises, it becomes more expensive for banks to borrow from the RBI. Banks pass this increased cost on to customers, resulting in higher interest rates and EMIs on home loans, car loans and personal loans. Impact on FDs: Along with making loans more expensive, banks may also raise FD rates to attract depositors. Why does the Reserve Bank raise and lower the repo rate? The repo rate is a tool to fight inflation. When inflation is high, the central bank raises it to try to reduce the flow of money in the economy. If the policy rate is high, borrowing from the central bank becomes more expensive for banks. In turn, banks make loans more expensive for customers. This reduces the flow of money in the economy. As the flow of money declines, demand falls and inflation decreases. When the economy is going through a difficult period, the flow of money needs to be increased to support recovery. In such a situation, the central bank cuts the policy rate. This makes borrowing from the central bank cheaper for banks, and customers can also obtain loans at lower interest rates. Neutral Stance: During the preceding MPC meet in August 2026, the RBI had also maintained status quo on neutral stance. The MPC’s accommodative stance means that the apex would look to either maintain status quo on the repo rate or slash it. While, neutral stance means that the central bank is open to either increase or decrease the benchmark policy rate depending on the situation on the ground.