Repo rate hike: how much will your EMI increase?

What changed in October 2026

On 7 October 2026 the RBI’s Monetary Policy Committee raised the policy repo rate by 25 basis points, from 5.25% to 5.50%, and changed its stance to “calibrated tightening”. It was the first hike after a year of cuts: through 2025 the MPC lowered the repo by a total of 125 basis points, from 6.50% to 5.25%. Banks moved quickly — SBI raised its external benchmark lending rate (EBLR) from 7.9% to 8.15% with effect from 15 October 2026, and HDFC Bank prices home loans directly as repo + 2.50% to 7.95%, so its floor moved to 8%.

Why your EMI follows the repo rate

Since October 2019, new floating-rate retail loans from banks must be linked to an external benchmark — in practice almost always the repo rate. Your rate = repo + the bank’s spread + a credit-risk premium based on your profile. The spread and premium stay fixed for the life of the loan unless your credit profile changes, so every repo move passes through almost one-for-one, and the rate must be reset at least once every three months. Older loans linked to MCLR or base rate react more slowly and only on their reset dates (usually every 6 or 12 months). Fixed-rate car and personal loans are not affected once disbursed.

EMI increase for a 0.25% hike (20 years remaining)

As a rule of thumb, each 0.25% adds about ₹16 per lakh to a 20-year EMI. If rates rose by a full 1% from 8% to 9%, the EMI on ₹50 lakh would go up by ₹3,164 a month — or, with the EMI unchanged, the remaining tenure would stretch from 20 years to about 25 yrs 4 mo.

Higher EMI or longer tenure: which is better?

Banks usually keep your EMI the same and quietly extend the tenure. Under RBI’s August 2023 circular on resetting floating rates, lenders must tell you about the impact and give you a choice: increase the EMI, extend the tenure, a mix of both, or prepay. They must also let you switch to a fixed rate if the bank offers one.

On ₹50 lakh with 20 years left, accepting the higher EMI (₹42,603) means total remaining interest of ₹52.25 lakh. Keeping the EMI at ₹41,822 and extending the tenure by 1 yr means ₹55.33 lakh — ₹3.08 lakh more. Extension is costlier the longer your remaining tenure, and on a 30-year loan a large hike can stretch the tenure dramatically; RBI also expects banks to avoid extensions that cause negative amortisation.

What to do now

• Check your sanction letter for the benchmark (repo/EBLR or MCLR) and your spread. If you are on an old MCLR or base-rate loan, moving to the repo-linked regime with the same bank for a small fee can lower your rate.
• Compare spreads. If your spread is much higher than what new borrowers with your credit score get, ask for a reprice or consider a balance transfer.
• Prepay if you can. Even one extra EMI a year offsets most of the effect of a 0.25% hike — see prepay vs invest.
• Opt for the EMI increase if your budget allows, especially early in the loan.
• Keep an eye on the next MPC meeting — the stance signals whether more hikes are likely, but no one can predict rates with certainty.

FAQ: repo rate and EMI

What is the current RBI repo rate?

The repo rate is 5.50%, raised by 25 basis points from 5.25% on 7 October 2026.

How much will my EMI increase after the repo hike?

For a 20-year home loan, about ₹16 per ₹1 lakh for each 0.25% rise — about ₹781 a month on ₹50 lakh.

Will my bank increase the EMI or the tenure?

Most banks extend the tenure by default. Under RBI rules they must inform you and let you choose a higher EMI, a longer tenure, a combination, or prepayment.

Does the repo rate hike affect my car loan?

Not if it is a fixed-rate loan, which most car loans are. New car loans may be priced higher after the hike.

When does the new rate apply to my home loan?

Repo-linked loans must reset at least once every three months; many banks apply changes from the next reset date. MCLR-linked loans change on their 6- or 12-month reset dates.