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RBI’s October monetary policy, the MPC unanimously raised the repo rate by 25 bps

ICICIdirect Research 08 Oct 2026 DISCLAIMER

News: As per RBI’s October monetary policy, the MPC unanimously raised the repo rate by 25 bps to 5.50%, its first hike since February 2023, and shifted the stance from neutral to “calibrated tightening” as inflation risks from crude, food prices and broader price pressures increased. RBI raised its FY27 GDP growth forecast to 7.1% from 6.7% and CPI inflation forecast to 5.2% from 5.0%, while indicating that near-term policy choices are now between a pause and further hikes rather than rate cuts. As per media reports, Transmission has been immediate: effective October 8, Karur Vysya Bank increased its repo-linked rate 8.55%→8.80%, PNB 8.10%→8.35%, Indian Bank 7.95%→8.20%, while Bank of Baroda, Bank of India and other lenders also raised repo-linked benchmarks by 25 bps.

View: Given, the large FCNR(B) mobilisation and currently comfortable system liquidity reduce the immediate need for banks to aggressively raise domestic deposit rates, potentially extending the asset-liability repricing benefit. Thus margins are anticipated to witness an increase of 5-10 bps based on asset mix across banks.

Impact: Positive

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