NRIWallah team
Updated October 2026
On 7 October the Reserve Bank of India raised its repo rate, the rate at which it lends to banks, by a quarter of a point to 5.50%. It is the first rise since 2023 and ends the run of cuts that began in February 2025. The central bank also moved to a tightening stance and said cuts are off the table for now.
The cause is inflation, pushed up by fuel and food prices after the conflict in the Middle East lifted energy costs. Consumer inflation was 4.8% in August, above the 4% target, and the RBI expects it to average close to 5.8% over the next three quarters. Economists expect about another half a point of rises by March 2027.
What the rise means for your Indian money
| Your Indian money | Likely effect | What to do |
|---|---|---|
| Floating-rate home loan | EMI or loan term rises, usually within three months | Check the benchmark; consider part-prepayment |
| Fixed-rate home loan | No change until the rate is reset | Compare offers when it comes up for renewal |
| NRE and NRO deposits | Rates likely to rise, but slowly | Spread new deposits across tenors |
| FCNR(B) deposits | Little change soon | Compare with NRE after currency risk and tax |
| Debt mutual funds | Prices of long-maturity funds fall | Check the fund’s average maturity |
| Shares and SIPs | Higher rates weigh on valuations | Keep to your plan; review your risk |
| Rupee and remittances | Still weak; a rise slows the slide, not reverses it | Send when you need to, not at a guessed bottom |
Floating-rate home loans: expect a higher EMI or a longer loan
Most new Indian home loans are linked to the repo rate, and lenders must pass changes on at least once every three months. Many keep the EMI the same and lengthen the loan instead, so check which your lender does.
Take a ₹50 lakh loan over 20 years at 8.50%, with an EMI of ₹43,391:
| Scenario | New rate | New EMI | Extra a month | Or the loan runs to |
|---|---|---|---|---|
| This rise only (+0.25 points) | 8.75% | ₹44,186 | ₹794 | about 21 years |
| This rise plus 0.25 more | 9.00% | ₹44,986 | ₹1,595 | about 22 years |
| This rise plus 0.50 more | 9.25% | ₹45,793 | ₹2,402 | about 24 years |
The last row is the further half point economists expect. Your own rate is your lender’s margin over the repo rate, so the amounts will differ.
- Check what your loan is linked to. Repo-linked loans reprice at the next reset. Older loans tied to a bank’s own lending rate move on a different schedule, and you can usually ask to switch, though some banks charge a fee.
- Use spare balances to prepay. Banks cannot charge a prepayment penalty on floating-rate loans to individuals. At 8.75% the loan costs more than the 6.1% to 6.75% a one-year NRE deposit pays (as of October 2026), though keep an emergency fund.
- Remember the rent. If the flat is let out, the loan interest reduces the rent you are taxed on in India. Our guide to rent taxed in two countries shows how.
- Borrowing abroad as well? UK and US mortgage rates have risen too. See our guide to mortgage rates in the UK and US .
Deposit rates will follow, but slowly
Banks usually raise loan rates faster than deposit rates. Large banks are also holding plenty of dollar money from the temporary deposit schemes this year, which are covered in our FCNR swap window guide . They have little reason to raise NRI deposit rates quickly.
That leaves a thin margin. A one-year NRE deposit paying about 6.5% sits against inflation heading towards 6%. An NRO deposit is taxed at 30% plus cess before you receive the interest, so 6.5% becomes about 4.5%.
- Spread new money across one to three years. If banks raise rates over the next few months, you can reinvest the shorter deposits at the higher rate.
- Check the early-withdrawal penalty. It is 0.5% to 1% at the banks we track, and breaking a deposit also costs you the rate you were promised.
- Compare FCNR(B) with NRE. An FCNR deposit in dollars or pounds carries no rupee risk, which matters while the rupee is weak. The FD rates page and FCNR calculator show both.
A weak rupee helps money going in and hurts savings kept in rupees
The rupee is about ₹96 to the dollar and ₹127 to the pound (as of early October 2026), after falling around 14% against the dollar in the year to May. A rate rise supports it but is unlikely to reverse the fall.
If you send money to India, each pound or dollar buys more rupees than it did a year ago. If you keep rupee deposits to spend abroad later, the currency can take back more than the interest adds. Our remittance calculator shows what a transfer is worth today, and the FD comparison shows how a rupee deposit compares with saving where you live.
Bond funds and shares react differently
When yields rise, existing bonds lose value. Debt funds holding long-dated bonds fall furthest in the short run, while funds holding short maturities fall least and reinvest at the new, higher yields.
Indian shares were down about 13% for the year on the day of the decision, and higher rates tend to weigh on valuations. That is not a reason on its own to stop a monthly investment, but it does mean checking how much risk you are comfortable with. The SIP calculator compares a monthly investment in rupees with one in your own currency.
NRIWallah does not provide financial or tax advice. Rates, tax rules and lender terms change; confirm the current position with your bank, lender or a qualified adviser before acting.
