Repo at 5.50%: The Reset Choices Your Bank Must Offer, With the EMI Math for Bengaluru Borrowers

On 7 October 2026, the Reserve Bank of India raised the policy repo rate by 25 basis points, from 5.25 per cent to 5.50 per cent, with immediate effect. For a Bengaluru family three months into a Rs 60 lakh floating-rate home loan, the next letter from the bank is now a matter of when, not if. It will say the rate has gone up, and it will usually say either that the EMI is higher or that the loan will run for longer. What many borrowers do not realise is that the RBI's own rules say the lender must offer a choice.

This guide sets out what the October rate notification said, what RBI's reset framework requires lenders to tell you and offer you, and what a 25 basis point increase does to an EMI in plain numbers. The arithmetic below is illustrative and assumes the increase is passed through in full to a repo-linked loan; your bank's actual rate depends on its benchmark and your spread.

The short answer. RBI's notification of 7 October 2026 moved the repo rate to 5.50 per cent, with the Standing Deposit Facility at 5.25 per cent and the Marginal Standing Facility at 5.75 per cent. Under RBI's August 2023 circular on reset of floating rates, as explained in its FAQ updated on 1 October 2025, when rates reset for a class of borrowers such as home loans the lender shall offer an increase in EMI, a longer tenor with the EMI unchanged, or a mix of both; a switch to a fixed rate where the lender provides that option; and prepayment in part or full at any point. On an illustrative Rs 60 lakh, 20-year loan, a move from 8.25 to 8.50 per cent adds about Rs 945 a month to the EMI. The trade-off: a higher EMI keeps your total interest lower, while a longer tenor protects monthly cash flow but costs more over the life of the loan.

What exactly did RBI change on 7 October 2026?

The policy rates. The RBI notification on the Liquidity Adjustment Facility, reference RBI/2026-27/282 dated 7 October 2026, says the policy repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 5.25 per cent to 5.50 per cent with immediate effect. The same notification puts the Standing Deposit Facility rate at 5.25 per cent and the Marginal Standing Facility rate at 5.75 per cent.

For a home buyer, the repo rate is the number that matters most, because many floating-rate home loans are linked to it as an external benchmark. When the benchmark moves, the loan rate moves at the next reset date set out in your loan terms. For the committee's reasoning behind the move, see our earlier report on the October 2026 MPC minutes.

What does a 25 basis point rise do to an EMI?

It adds a modest amount each month and a larger amount over the years. The figures below are illustrative, for a 20-year loan with the full tenure remaining, using standard EMI arithmetic at 8.25 per cent before and 8.50 per cent after.

The rule of thumb row divides the EMI for a Rs 1 crore loan by 100. It is a quick way to scale the numbers to your own loan size, as long as the tenure and rates are the same.

What options must your lender offer at reset?

Three kinds of choice. RBI's FAQ on the reset of floating interest rate circular, updated as on 1 October 2025, says that whenever there is a reset of interest rates for an entire class of borrowers in a particular loan category, such as home loans, due to an increase in the reference benchmark, the regulated entity shall provide the following options: either enhancement in EMI or elongation of the number of EMIs keeping the EMI unchanged, or a combination of both; a switch to a fixed interest rate for the remaining portion of the loan, where such an option is provided by the lender; and to prepay, either in part or in full, at any point during the residual tenor.

The words where such an option is provided by the lender were inserted by RBI's Interest Rate on Advances amendment directions dated 29 September 2025, effective 1 October 2025, according to the FAQ's footnote. So a fixed-rate switch depends on whether your lender offers one, while the EMI, tenor and prepayment choices are part of the list the lender shall provide.

The FAQ also says the circular covers equated instalment based personal loans irrespective of whether they are linked to an external benchmark or an internal benchmark such as MCLR, and that it applies to existing borrowers.

Higher EMI or longer tenor: what is the real difference?

Total interest. Take the illustrative Rs 60 lakh loan over 20 years. At 8.25 per cent, total interest over the full term works out to about Rs 62.7 lakh. If the rate moves to 8.50 per cent and you accept the higher EMI of Rs 52,069, total interest becomes about Rs 65.0 lakh.

If you instead keep the EMI at Rs 51,124 and let the tenor stretch, the loan runs about 12 months longer, roughly 252 months in all, and total interest rises to about Rs 68.9 lakh. In this example the longer tenor costs about Rs 3.9 lakh more in interest than accepting the higher EMI, in exchange for keeping the monthly outgo unchanged.

Prepayment is the third lever. Continuing the illustration, if the borrower prepays Rs 2 lakh at the reset, so the balance falls to Rs 58 lakh, and keeps paying the higher EMI of Rs 52,069 at 8.50 per cent, the loan finishes in about 220 months instead of 240, roughly 20 months sooner. Total interest on the remaining loan falls to about Rs 56.8 lakh. These numbers assume no prepayment charges; check what your loan terms say, since the FAQ lists prepaying in part or in full at any point during the residual tenor among the options the lender shall provide at reset.

Neither choice is right for everyone. A household with tight monthly cash flow may value the unchanged EMI; one with headroom may prefer to pay a little more each month and finish sooner. Our earlier explainer on choosing between a higher EMI and a longer tenure works through more cases.

What should the bank tell you, and when?

Both at sanction and during the loan. The FAQ says that at the time of sanction, the annualised rate of interest or Annual Percentage Rate shall be disclosed in the Key Fact Statement and the loan agreement, along with the possible impact of a change in the benchmark rate on the loan.

During the tenure, any increase in the EMI or tenor on account of the external benchmark rate shall be communicated, and quarterly statements shall be provided disclosing, at the minimum, the principal and interest recovered till date, the EMI amount, the number of EMIs left and the annualised rate of interest for the tenor of the loan.

The FAQ adds that lenders can levy applicable charges for switching between floating and fixed rates, and for other service charges incidental to the switch, which shall be transparently disclosed in the sanction letter and at the time of any revision. Those charges must be approved by the lender's board and displayed on its website.

What should a Bengaluru borrower do after this hike?

1. Find your loan's benchmark and reset date in the sanction letter or Key Fact Statement.
2. Check your latest quarterly statement for principal and interest recovered, EMI and EMIs left.
3. Work out the new EMI using about Rs 16 extra per Rs 1 lakh of a 20-year loan as a rough guide for a 25 basis point rise.
4. Decide whether you prefer a higher EMI, a longer tenor, or a mix, and tell the bank in writing.
5. Ask whether your lender offers a fixed-rate switch and what the switching charges are.
6. Consider whether a part prepayment fits your budget, since the options include prepaying at any point.
7. Keep every reset letter and quarterly statement, so you can check the bank applied your chosen option.

Frequently asked questions

What is the repo rate after the October 2026 RBI decision?

RBI's notification dated 7 October 2026, reference RBI/2026-27/282, says the policy repo rate under the Liquidity Adjustment Facility was raised by 25 basis points from 5.25 per cent to 5.50 per cent with immediate effect. The Standing Deposit Facility rate is 5.25 per cent and the Marginal Standing Facility rate is 5.75 per cent.

Can I choose a longer tenure instead of a higher EMI?

RBI's FAQ on reset of floating rates says that when rates reset for a class of borrowers such as home loans, the lender shall offer enhancement in EMI, elongation of the number of EMIs keeping the EMI unchanged, or a combination of both, along with prepayment and, where offered, a fixed-rate switch.

How much does a 25 basis point hike add to my EMI?

For an illustrative 20-year loan with full tenure remaining, a move from 8.25 to 8.50 per cent raises the EMI on Rs 60 lakh from about Rs 51,124 to about Rs 52,069, an increase of about Rs 945 a month, or roughly Rs 16 for every Rs 1 lakh borrowed.

Must my bank offer a switch to a fixed rate?

RBI's FAQ, updated as on 1 October 2025, lists a switch to a fixed rate for the remaining portion of the loan as an option where such an option is provided by the lender. That wording was inserted by RBI's amendment directions dated 29 September 2025, effective 1 October 2025.

A rate rise is not a reason to panic, but it is a reason to read your bank's letter closely and make the choice yourself. This is general information for home buyers, not financial advice.

Last updated 2026-10-27. PropNewz Team.