RBI’s First Rate Increase Since 2023 Resets India’s Cost-of-Capital Outlook

Mumbai, 7 October 2026 – The Reserve Bank of India has increased its benchmark repo rate by 25 basis points to 5.50%, delivering its first rate increase since February 2023 and signalling that inflation and currency stability now outweigh the case for maintaining the earlier level of monetary support.

The decision reverses part of the easing cycle that had taken the repo rate to 5.25%. Inflation had risen to about 4.8% in August, while energy costs and a weaker rupee increased the risk that imported price pressure would become broader. India’s heavy dependence on crude-oil imports makes monetary policy especially sensitive to a sustained energy shock, even when domestic demand and growth remain resilient.