Banks including Bank of Baroda, Bank of India, Indian Bank, Indian Overseas Bank, Karur Vysya Bank and Tamilnad Mercantile Bank have increased their repo-linked lending rates by 25 basis points (bps), making floating-rate home, auto and other retail loans more expensive.
Banks revise repo-linked lending rates
| Bank | Old | New | Change | Effective from |
|---|---|---|---|---|
| Bank of Baroda | 7.90% | 8.15% | +25 bps | October 8, 2026 |
| Indian Overseas Bank | 8.10% | 8.35% | +25 bps | October 8, 2026 |
| Indian Bank | 7.95% | 8.20% | +25 bps | October 8, 2026 |
| Karur Vysya Bank | 8.55% | 8.80% | +25 bps | October 8, 2026 |
| Tamilnad Mercantile Bank | 8.25% | 8.50% | +25 bps | October 8, 2026 |
| Bank of India | 8.10% | 8.35% | +25 bps | October 7, 2026 |
The rate revisions come hours after the RBI’s Monetary Policy Committee (MPC) unanimously voted to raise the repo rate to 5.50% from 5.25% and shifted its policy stance to “calibrated tightening”, signalling that easing is unlikely in the near term.
The standing deposit facility (SDF) rate has been raised to 5.25%, while the marginal standing facility (MSF) rate and Bank Rate now stand at 5.75%.
Why the RBI raised rates
The MPC said the global environment remains challenging amid heightened geopolitical tensions and volatile commodity prices. RBI Governor Sanjay Malhotra highlighted the re-escalation of the West Asia conflict, which pushed the average Indian crude oil basket price to $116.1 per barrel in September from $82 in July.
While the central bank said India’s growth momentum remains broad-based, it warned that the inflation outlook has become less favourable. CPI inflation rose to 4.8% in August from 4.5% in July, driven largely by higher food and fuel prices, while core inflation edged up to 4.2%.
The RBI now expects headline inflation to average nearly 5.8% over the next three quarters and has projected full-year CPI inflation at 5.2% for 2026-27. The MPC indicated that rate cuts are effectively off the table for now, with future policy action likely limited to either a pause or further tightening depending on inflation trends.
What the RBI said on India’s economic growth
India’s economy grew 7.8% in the first quarter of 2026-27, prompting the RBI to raise its full-year GDP growth forecast by 40 bps to 7.1%. Growth is projected at 7.2% in the second quarter, 6.9% in the third quarter and 6.8% in the fourth quarter.
Credit growth stays strong
India’s economy grew 7.8% in the first quarter of 2026-27, prompting the RBI to raise its full-year GDP growth forecast by 40 bps to 7.1%.
Growth is projected at 7.2% in the second quarter, 6.9% in the third quarter and 6.8% in the fourth quarter.
(Edited by : Ajay Vaishnav)