The Reserve Bank has shifted from a neutral to a tightening stance, putting inflation ahead of growth concerns even as it upgrades its growth forecast.

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• The six-member Monetary Policy Committee, at its 63rd meeting held October 5 to 7, 2026, voted unanimously to raise the policy repo rate by 25 basis points to 5.50%.
• Governor Sanjay Malhotra announced the decision on October 7, lifting the repo rate under the Liquidity Adjustment Facility from 5.25%.
• It is the first repo rate increase since February 2023, when the rate was raised by 25 basis points to 6.5%.
• The rate had stayed at 5.25% through the previous four policy reviews, including the August 2026 meeting.
• The committee also changed its policy stance from neutral to calibrated tightening, reportedly by a 4-2 majority.
• Following the hike, the Standing Deposit Facility rate moved to 5.25%, while the Marginal Standing Facility rate and the Bank Rate rose to 5.75%.
• Inflation was the main trigger, with the RBI raising its CPI inflation projection for 2026-27 to 5.2%.
• Despite tightening, the RBI revised its 2026-27 GDP growth forecast upward to 7.1%.
• Firm global bond yields, which affect capital flows and the rupee's external value, were cited among the factors behind the decision.
• Foreign exchange reserves stood at 734.6 billion US dollars on October 2, 2026, equal to about 11 months of import cover.
• The Governor said the RBI will use a mix of liquidity tools to align the weighted average call rate, which traded in the lower half of the corridor, with the repo rate.
• Section 45ZB of the RBI Act, 1934, is the statutory basis for the committee, whose minutes are due to be published on October 21.

Tags: RBIMonetaryPolicy, RepoRate, CalibratedTightening