The Reserve Bank of India raised the policy repo rate by 25 basis points, from 5.25% to 5.50%, on 7 October 2026. Within days, several banks revised their repo-linked lending rates. Here is how the pass-through is playing out and what it means in rupees for a typical home loan.
What changed on 7 October
The Monetary Policy Committee moved the repo rate from 5.25% to 5.50% and kept a calibrated tightening stance. Home loans linked to an external benchmark (repo-linked rates such as RLLR or EBLR) reset when the benchmark changes, so the effect reaches those borrowers quickly, typically at the next reset date set in the loan agreement.
How some banks have revised their benchmarks
The table lists publicly reported revisions. Effective dates and spreads differ by lender, so always check your sanction letter and the bank's website.
| Bank | Benchmark | Earlier | Revised | Effective |
|---|---|---|---|---|
| Punjab National Bank | RLLR | 8.10% | 8.35% | 8 Oct 2026 |
| Bank of India | RLLR | 8.10% | 8.35% | 7 Oct 2026 |
| Bank of Baroda | BRLLR | 7.90% | 8.15% | 8 Oct 2026 |
| Indian Overseas Bank | RLLR | 8.10% | 8.35% | Reported Oct 2026 |
| UCO Bank | RLLR | 8.05% | 8.30% | Reported Oct 2026 |
| Tamilnad Mercantile Bank | Repo-linked | 8.25% | 8.50% | Reported Oct 2026 |
| Karur Vysya Bank | Repo-linked | 8.55% | 8.80% | Reported Oct 2026 |
The State Bank of India has also raised its EBLR/RLLR by 25 bps, effective 15 October, with home loan rates reported in a 7.50%–8.80% band. Your own rate is the benchmark plus a spread fixed at sanction, so a 25 bps benchmark rise generally means a 25 bps rise for you.
What 25 bps does to a ₹40 lakh, 20-year loan
| Rate | Monthly EMI | Change vs 8.50% |
|---|---|---|
| 8.50% | ₹34,713 | – |
| 8.75% | ₹35,348 | +₹635 (about ₹7,626 a year) |
| 9.00% | ₹35,989 | +₹1,276 |
| 9.25% | ₹36,635 | +₹1,922 |
If your lender keeps the EMI unchanged instead, the tenure stretches. At 8.75% the loan would run about 252 months instead of 240; at 9.00%, about 267; at 9.25%, about 285.
Check this: many lenders extend tenure by default rather than raising the EMI. A longer tenure keeps the monthly outgo steady but increases total interest paid.
What about deposits?
Deposit rates do not move automatically with the repo rate. Reports quote the SBI chairman as saying the bank may not raise deposit rates for two to three months, while some institutions have trimmed or raised specific FD tenures. Senior-citizen FDs at some small finance banks are reported at up to 8.50%. Compare current deposit and loan rates before deciding between prepaying a loan and parking surplus cash.
Practical steps for borrowers
- Find your reset date and spread in the loan agreement or lender portal.
- Ask for the revised EMI and tenure in writing, and decide whether to keep the EMI or the tenure fixed.
- If you can, make a part-prepayment; on floating-rate home loans taken by individuals, prepayment generally carries no foreclosure charge under RBI rules.
- Keep an emergency fund of 6 months of EMIs and expenses before prepaying aggressively.
- The next MPC meetings are scheduled for 2–4 December 2026 and 3–5 February 2027; watch them for further moves.
Frequently asked questions
Will my EMI rise automatically after the repo rate hike?
If your loan is linked to a repo-based benchmark, the rate resets at the interval in your agreement. The lender then either raises the EMI or lengthens the tenure; you can usually request which one.
Is the hike different for older MCLR-linked loans?
MCLR-linked loans reset on their own cycle (often six or twelve months), so the effect can arrive later. You may ask your lender about switching to a repo-linked rate and any switching fee.
Should I prepay my home loan now?
It depends on your emergency fund, other debts and alternative returns. Part-prepayment reduces interest on a rising-rate loan, but keep liquidity first.
How much does 25 bps cost on a ₹40 lakh loan?
About ₹635 more per month over 20 years, or roughly ₹7,626 a year, at an 8.50% to 8.75% move.
Sources
- RBI press release, Monetary Policy Statement, 7 October 2026
- Bank rate notices and press reports: PNB, Bank of India, Bank of Baroda, IOB, UCO Bank, TMB, KVB (8 Oct 2026 onwards)
- SBI EBLR/RLLR revision effective 15 October 2026 (press reports)
- RBI MPC meeting schedule 2026–27 (RBI press release, 23 March 2026)
- Easiloan EMI calculations
This article is for general information only and is not financial, legal or tax advice. Figures are as reported on the date of publication and may change; EMI examples are illustrative, not offers. Please confirm current rates, charges and eligibility with the lender before deciding.
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