Home, Car Loan EMIs May Get Costlier, RBI Could Hike Repo Rate In October Amid Rising Inflation

Mumbai: Home and car loan borrowers could face higher monthly payments as expectations grow that the Reserve Bank of India (RBI) may increase the repo rate in October.

Rising crude oil prices, higher inflation and global uncertainty have increased the possibility of a rate hike. The RBI’s Monetary Policy Committee (MPC) will meet from October 5 to 7, 2026.

Repo Rate Could Rise To 5.50 percent

The RBI has kept the repo rate unchanged at 5.25 percent in its previous four policy reviews.

However, a Reuters poll showed that nearly 60 percent of economists expect the RBI to raise the repo rate by 25 basis points in October. If this happens, the rate will increase to 5.50 percent.

Japanese brokerage Nomura expects the RBI to increase the repo rate by 25 basis points each in October and December. This would take the rate to 5.75 percent by the end of 2026.

Why RBI May Raise Rates?

Inflation is becoming a major concern for the central bank. India’s retail inflation rose to 4.82 percent in August from 4.45 percent in July.

Higher crude oil prices are another concern because India depends heavily on imported oil. Expensive crude can raise fuel, transport and other costs, adding to inflationary pressure.

Global central banks have also been tightening monetary policy, adding pressure on the RBI to carefully manage inflation and the rupee.

How Borrowers Could Be Affected?

A repo rate hike can increase borrowing costs for banks, which may eventually result in higher interest rates on loans.

Borrowers with floating-rate home loans and other loans linked to external benchmarks could see their EMIs increase or their loan tenure extended.

New home, car and personal loans could also become more expensive if banks raise lending rates.

However, any increase will depend on the RBI’s final decision and how individual banks pass on the higher rates to their customers.