Quick answer: On 7 October 2026, the RBI's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% and changed its stance to calibrated tightening. If your business loan is floating-rate and linked to an external benchmark such as the repo rate, it will reprice at your next reset date, so your EMI or your tenure may rise. A fixed-rate loan does not change during its fixed period. Cash credit and overdraft interest usually rises on the drawn balance. The exact effect depends on your benchmark, spread and reset terms, so read your loan agreement and ask your lender in writing.
Last checked against RBI and other sources on 25 October 2026. Rates and rules change, so confirm with your lender before acting. This is general information, not financial advice.
What the RBI decided
After its meeting on 5 to 7 October 2026, the MPC voted unanimously to raise the policy repo rate under the liquidity adjustment facility by 25 basis points to 5.50%. As a result:
Rate | Level after 7 October 2026 |
|---|---|
Policy repo rate | 5.50% (up from 5.25%) |
Standing deposit facility (SDF) rate | 5.25% |
Marginal standing facility (MSF) rate and Bank Rate | 5.75% |
Policy stance | Calibrated tightening |
The MPC said the stance signals that, in current conditions, rate cuts are off the table in the near term and the next move can only be a hike or a pause. Two members preferred to keep the stance neutral. Press reports describe this as the first repo rate hike since February 2023.
Which of your loans are affected, and when
Not every loan reprices the same way. Check your own agreement against this table:
Your loan | What usually happens |
|---|---|
Floating-rate loan linked to an external benchmark such as the repo rate | The rate moves at your next reset date. For bank loans on an external benchmark, RBI's framework requires the benchmark to be reset at least once every three months |
Floating-rate loan linked to the lender's internal benchmark, such as MCLR | The rate moves when the lender changes that benchmark and your reset date arrives |
NBFC or other lender's floating-rate loan | Follows the lender's own benchmark and policy, so confirm the reset terms |
Fixed-rate loan | No change during the fixed period |
Fixed-then-floating loan | No change until it switches, and the rate then may reflect today's higher benchmark |
Cash credit or overdraft | Usually floating, with interest charged on the drawn balance at the revised rate |
A new loan | Priced at the lender's rates after the hike |
What 25 basis points means in rupees (hypothetical)
A term loan. Suppose you have a ₹40 lakh balance with 60 months left. If the rate moves from 12.00% to 12.25%, the EMI changes like this:
Before | After | |
|---|---|---|
Rate | 12.00% | 12.25% |
EMI | ₹88,978 | ₹89,484 |
Extra per month | – | about ₹506 |
Extra per year | – | about ₹6,100 |
If the lender keeps your EMI unchanged instead, the tenure stretches by less than a month. A bigger or repeated change would stretch it more.
A cash credit limit. If you draw an average of ₹50 lakh, a 25 bps rise adds about ₹12,500 a year, or around ₹1,040 a month, in interest.
These are illustrations only. Your actual change depends on your spread, reset date and how the lender applies the rise to your EMI or tenure.
How to find out what applies to you
Look in your sanction letter, loan agreement and Key Facts Statement for:
Whether the rate is fixed, floating or dual.
The benchmark your loan is linked to, and the spread over it.
The reset frequency and the next reset date.
Whether a rise changes your EMI, your tenure or both.
Any charge for switching from floating to fixed, or the other way round.
If any of this is missing or unclear, ask the lender to confirm it in writing. Our guide to how banks calculate cash credit limits and our comparison of working capital loan vs cash credit vs overdraft explain how working-capital facilities are priced and used.
What you can do now
List every loan and facility with its rate type, benchmark, spread and reset date.
Recalculate your cash flow for a higher EMI or longer tenure, and for a higher interest bill on cash credit.
Ask about prepayment. RBI's Pre-payment Charges Directions bar specified lenders from charging prepayment penalties on floating-rate business loans to individuals and MSEs sanctioned or renewed on or after 1 January 2026. Other loans follow the lender's policy. Our guide to business loan charges in India explains who is covered.
Ask whether you can negotiate your spread if your credit profile has improved. See how banks assess business loan eligibility to understand what lenders look at.
Compare before you switch to a fixed rate. A fixed rate may be higher than today's floating rate, and a switch can carry charges.
Build a buffer for a possible further rise. The MPC said the next move can only be a hike or a pause, and press reports put the next meeting on 2 to 4 December 2026.
RBI's draft interest rate framework
On 12 August 2026, the RBI released draft Interest Rates on Loans and Advances Directions, 2026 for public comment. They propose a common framework for banks, co-operative banks and NBFCs. Under the draft, the benchmark on a floating-rate loan would be reset at least once every three months for most lenders, with the benchmark, reset frequency and reset date written into the loan agreement. Commercial banks would have to link floating-rate MSME and personal loans to an external benchmark, and parts of the spread could not be revised for three years. The draft is proposed to apply from 1 April 2027. It is a draft, so check the RBI website for the final version.
Mistakes to avoid
Assuming every loan changes immediately. The change comes at the reset date.
Ignoring tenure. Your EMI may stay the same while your tenure quietly grows.
Switching to fixed in a hurry without comparing the rate and the fees.
Overlooking cash credit. Interest on the drawn balance rises too.
Leaving questions unasked. If your reset terms are not clear, ask in writing.
Need a second opinion on your loans?
ExpressDhan is a debt and structured finance advisory firm. If you want to review your loan structure after the rate change and talk through your options, you can learn about our services or contact us, or call +91 76199 77199 (Mon–Sat, 9:00 AM–6:30 PM). Eligibility, pricing and approval depend on the lender, your profile and verification, and no outcome is guaranteed.