Loan EMIs in India are set to rise again. On 7 October 2026 the Reserve Bank of India raised the repo rate for the first time since February 2023, and the September inflation print that followed showed why. Here is what changed, what it costs a typical shop owner, and what to do this month.
Key takeaway: Repo rate is now 5.50% (up 25 bps from 5.25%). Retail inflation rose to 5.54% in September 2026. Repo-linked loans can reset within one quarter; on a ₹20 lakh, 10-year business loan the EMI rises by about ₹278 a month.
Proof matrix: what was announced
| Item | Detail | Source |
|---|---|---|
| Repo rate | 5.25% → 5.50% (+25 bps), effective 7 Oct 2026 | RBI MPC, 5–7 Oct 2026 |
| SDF rate | 5.25% | RBI MPC |
| MSF rate & Bank Rate | 5.75% | RBI MPC |
| Policy stance | Neutral → calibrated tightening | RBI MPC |
| CPI inflation, Sep 2026 | 5.54% (Aug: 4.83%); food 7.74% | MoSPI, 12 Oct 2026 |
| FY 2026-27 forecasts | GDP 7.1%, CPI 5.2% (Q3 CPI seen at 6.0%) | RBI MPC |
Why did RBI raise rates?
RBI raised rates because inflation is spreading beyond food and fuel. Crude oil climbed sharply between July and September, the monsoon ended about 13% below normal, and core inflation (prices excluding food and fuel) began rising. Growth, at 7.8% in Q1 FY 2026-27, is strong enough to take a small hike. The MPC minutes, released on 21 October, signal that rate cuts are off the table for now: the next move is a hike or a pause.
How much will your EMI go up?
Your EMI rises only if your lender passes on the hike. Most new floating-rate loans to small businesses and home buyers are linked to the repo rate (EBLR), and banks reset these at least once every three months. The table assumes the full 0.25% is passed on.
| Loan | Old rate | New rate | EMI before | EMI after | Extra interest over loan life |
|---|---|---|---|---|---|
| ₹10 lakh business loan, 5 years | 11.00% | 11.25% | ₹21,742 | ₹21,867 | ₹7,493 |
| ₹20 lakh business loan, 10 years | 10.00% | 10.25% | ₹26,430 | ₹26,708 | ₹33,318 |
| ₹50 lakh home loan, 20 years | 8.00% | 8.25% | ₹41,822 | ₹42,603 | ₹1,87,507 |
Some banks keep the EMI the same and stretch the tenure instead. That hides the hike but costs you more in total interest, so ask your bank which option it has applied.
What it means for a small business beyond EMI
- Costlier working capital. Cash credit and overdraft limits are usually repo- or MCLR-linked, so interest on the amount you use goes up.
- Suppliers may tighten credit. When their own borrowing costs rise, distributors often cut credit days. Plan stock purchases with that in mind.
- Input prices are rising. Food inflation at 7.74% (onion prices roughly doubled year on year) squeezes margins for kirana, restaurants and tiffin services.
- Late payments cost more. Under the MSMED Act, buyers who pay micro and small suppliers late owe interest at three times the bank rate. With the Bank Rate at 5.75%, that is 17.25% a year, compounded monthly.
- FD rates may tick up. If you park surplus cash in fixed deposits, renewals could earn slightly more.
Action plan for this month
- Check your loan sanction letter: is the rate linked to repo (EBLR), MCLR or fixed? Fixed-rate loans do not change.
- Ask your bank for the reset date and whether it will raise the EMI or the tenure.
- If you have spare cash, a part-prepayment before the reset cuts the interest you pay.
- Review your price list. If input costs rose more than 5%, update rates now rather than after Diwali stock clears.
- Collect overdue customer payments first. Every rupee of udhar you recover is a rupee you do not borrow at the higher rate.
Track your loans and EMI in DAM
This flow is from DAM's in-app search (Loans & Advances).
- Open Search and type Loans & Advances, then tap New loan.
- Choose Loan taken, enter the amount, Interest rate (%), Rate per and Interest method.
- Fill No. of instalments and First due, then tap Generate instalment dates.
- Check the Repayment preview for EMI, interest and total payable. When your bank resets the rate, edit the loan and compare the new numbers.
Know your real EMI before the bank tells you
Record every loan, see the instalment schedule and total interest in one place.
Frequently Asked Questions
What is the repo rate now?
5.50%, after a 25 basis point hike on 7 October 2026.
Will my EMI go up immediately?
Not immediately. Repo-linked loans reset on the date set by your bank, at least once a quarter. Fixed-rate loans do not change.
Why did RBI raise rates when growth is strong?
To stop rising food, fuel and core prices from turning into persistent inflation. Retail inflation reached 5.54% in September 2026.
Will RBI cut rates soon?
The MPC changed its stance to calibrated tightening, which means the next move is either a hike or a pause, not a cut.
Sources
Content checked on 23 October 2026. RBI · MoSPI: CPI press release, September 2026 · SCC Online: RBI hikes repo rate to 5.50% · Infomerics: RBI MPC October 2026 review.
Disclaimer: This guide is for educational purposes only and does not constitute formal tax, legal or financial advice. EMI figures are illustrative and assume the full hike is passed on. Verify with a registered Chartered Accountant (CA) before acting.