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RBI MPC meeting October 2026: The Reserve Bank of India (RBI), on Wednesday, 7 October, raised the repo rate by 25 basis points to 5.50%. It is the first rate hike since February 2023, when it raised rates by 25 basis points. The members of the Monetary Policy Committee (MPC) of the central bank voted unanimously to raise rates by 25 bps.
The RBI MPC voted in a 4-2 majority to change the policy stance to "calibrated tightening", underscoring that, given the current situation, rate cuts are not a possibility in the near term. There could be further hikes or a pause on the current interest rates.
The RBI Governor Sanjay Malhotra, in his speech, flagged the threat of inflation, citing that global inflation may increase sharply, prompting global monetary tightening.
"The RBI's October hike acknowledges that cyclical inflation risks are no longer benign. A change in stance also underscored the RBI MPC's hawkish intent. Against a backdrop of elevated oil prices, tighter global conditions, and risks to food inflation from unfavourable weather, policymakers have chosen to reinforce inflation credibility before risks become entrenched," said Governor Malhotra.
The central bank raised its GDP growth forecast for the current financial year, underscoring a resilient Indian economy amid elevated oil prices driven by the US-Iran conflict.
The RBI projected real GDP growth for the financial year 2026-27 (FY27) at 7.1%, up from 6.7% projected at the August policy meeting.
Q2FY27 GDP forecast has been increased to at 7.2% from 6.4% earlier, Q3 GDP growth is expected at 6.9%, up from 6.5% estimated earlier. GDP estimates for Q4FY27 were kept unchanged at 6.8%.
However, for Q1FY28, the RBI trimmed the GDP growth forecast slightly to 7.1% from 7.3% projected at the August policy decision.
"High frequency indicators available so far suggest that economic activity is holding momentum in Q2, albeit with some moderation compared to the preceding quarter. Looking ahead, global economic uncertainty and supply chain disruptions are expected to have some bearing on domestic economic activity. Weak southwest monsoon along with strong El Niño conditions may impact the upcoming rabi season and rural demand," said the RBI Governor.
The central bank raised the CPI inflation forecast for FY27 to 5.2% from 5% earlier, with Q2 inflation at 4.9% (earlier 4.7%), Q3 at 6% (earlier 5.9%), and Q4 at 5.7% (earlier 5.5%). Inflation for Q1FY28 is projected at 5.6% (earlier 5.3%).
RBI projected core inflation for FY27 around 4.4%.
"The near-term outlook on inflation points towards continued pressures from the supply side, on account of the deficient Southwest monsoon, El Niño conditions and high volatility in international oil prices," said the RBI Governor.
"Price pressures are increasingly becoming visible across a range of commodities within the food component, apart from oil. In addition, early signs of inflation becoming generalised are also evident from the increase in core inflation and higher inflation across a larger segment of the CPI basket," he said.
The RBI said that system liquidity increased substantially during August and September due to the recent measures undertaken to attract capital inflows.
"As measured by the net position under the LAF, system liquidity stood at an average daily surplus of ₹5.9 lakh crore since the last MPC meeting in August 2026. The measures taken to absorb liquidity, combined with quarterly advance tax outflows, moderated the surplus liquidity in September," said Governor Malhotra.
"The system-level financial parameters related to capital adequacy, liquidity, asset quality and profitability of Scheduled Commercial Banks (SCBs) continue to remain robust. Similarly, the system-level parameters of NBFCs are also sound," said the Governor.
The RBI Governor underscored that net foreign direct investment (FDI) saw sustained improvement, with inflows of $13.8 billion during April-August 2026, up from $9.6 billion a year ago, driven by higher gross inflows and a slowdown in the growth of outward FDI.
"Robust gross FDI reflects the strong interest of global investors in India. While foreign portfolio investment (FPI) recorded net outflows of $10.3 billion during April-October 5, 2026, capital flow measures undertaken in the June 2026 policy have supported inflows; consequently, the balance of payments is expected to record a healthy surplus in 2026-27," said the RBI Governor.
The RBI has decided to allow interoperability among NBFC account aggregators, enabling aggregation of financial information through one account aggregator from all others.
The central bank has also decided to facilitate SEBI-regulated depositories in including information on deposit accounts in their consolidated account statement (CAS).
The measures will be implemented by 31 December 2026.
Besides, considering rapidly evolving financial market dynamics, the RBI is to constitute a 'Technical Consultative Committee' for financial markets. The committee, as per the RBI Governor, will serve as a forum for structured engagement with market participants and other stakeholders on policy and operational matters related to financial markets.
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