The Reserve Bank of India (RBI) has hiked the key repo rate by 25 basis points during its Monetary Policy Committee meeting today, i.e. on October 7, 2026, marking the first rise in nearly 4 years during inflation and strong economic growth. The repo rate stands at 5.50%, up from 5.25%.
How Will the Repo Rate Hike Impact Loan EMIs?
If you have ongoing loans or plan to take a new one, the higher repo rate will lead to higher EMIs. Lenders will pass on their increased borrowing costs to borrowers, meaning external benchmark-linked floating-rate home loans, auto loans, and personal loans will witness higher interest rates and increased monthly instalments.
For instance, if you are paying an 8.50% per annum interest rate on a 20-year tenure ₹50 lakh home loan at present, the interest rate can increase to 8.75% p.a. It means your EMI will go from ₹43,392 to ₹44,186. An Increase of ₹794 per month in your EMI.
If the borrower wants to retain the current EMI unchanged at ₹43,392 after the 25 bps rate hike, the loan repayment tenure could increase by a few months.
Impact on Personal Loans and Car Loans
The same goes for other floating interest rate loans, including personal loans and car loans.
The impact of the increased repo rate will also be visible on Fixed Deposits and Savings Accounts. Commercial banks may increase FD and savings account interest rates, offering better returns.
If you have an existing loan, the first thing you should do is contact the concerned lender and ask about the impact and effective date of the new interest rate. It takes a couple of months to switch to the new interest rate.
Impact on Fixed Deposits
If you are planning to open a fixed deposit, make sure to check which bank or financial institution is offering the increased rate. During these situations, banks often increase interest rates on FDs and savings accounts to attract cash.
India has joined major central banks in increasing rates as higher oil prices caused by the Iran war fuel inflation, reduce purchasing power and weigh on currencies. Also, weak monsoon rains due to El Niño have contributed to price pressures in Asia's third-largest economy.
Updated On Oct 7, 2026
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Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
