9 October 2026 Punjab Khabarnama Bureau : Several state-owned banks in India have increased their repo-linked lending rates by 25 basis points following the Reserve Bank of India’s (RBI) decision to raise the benchmark policy repo rate to 5.50 per cent. The revisions, announced by lenders including Punjab National Bank (PNB), Bank of Baroda, Indian Bank, Bank of India and Indian Overseas Bank, are expected to increase borrowing costs for customers whose loans are linked to external benchmarks.
The changes follow the RBI’s October 7 monetary policy decision, under which the six-member Monetary Policy Committee unanimously raised the repo rate by 25 basis points from 5.25 per cent to 5.50 per cent. Several banks implemented corresponding lending-rate increases from October 8, passing on the policy change to borrowers with repo-linked loans. <Cite refs={[“turn157330search0″,”turn157330search2″,”turn157330search8”]}/>
Major Banks Revise Lending Rates
Bank of India has raised its Repo Based Lending Rate by 25 basis points to 8.35 per cent from 8.10 per cent. The adjustment follows the central bank’s decision to increase its policy rate.
Other lenders, including PNB, Bank of Baroda, Indian Bank and Indian Overseas Bank, have also revised their repo-linked lending rates. The extent of the impact on individual customers will depend on the benchmark applicable to their loan agreements and the timing of rate resets.
UCO Bank has separately revised several benchmark-linked lending rates with effect from October 8. Its three-month Benchmark Lending Rate increased to 5.30 per cent from 5.25 per cent, while its six-month Treasury Bill Linked Rate rose to 5.70 per cent from 5.55 per cent. The 12-month Treasury Bill Linked Rate was increased to 5.95 per cent from 5.70 per cent.
The bank also raised certain government securities-linked rates and its repo-linked rates for selected lending products. However, UCO Bank kept its Marginal Cost of Funds-Based Lending Rates (MCLR) unchanged, highlighting that different lending benchmarks can respond differently to changes in monetary policy. <Cite refs={[“turn157330search0″,”turn157330search1″,”turn157330search5”]}/>
Borrowers Could Face Higher EMIs
The increase in lending rates could affect customers with home loans, vehicle loans, personal loans and eligible business loans linked to the repo rate. When a bank raises the applicable interest rate, borrowers may experience higher equated monthly instalments (EMIs) or a longer repayment period, depending on the lender’s repayment arrangements.
For example, a borrower with a floating-rate home loan may see the interest rate rise when the revised benchmark is applied. If the EMI remains unchanged, the repayment period could increase. If the lender adjusts the EMI instead, the monthly payment could rise.
The actual impact will depend on the outstanding loan balance, remaining tenure, interest rate, reset date and the bank’s repayment policy. A 25-basis-point increase does not translate into the same additional monthly payment for every borrower.
Customers should review their loan statements and check with their banks to establish when the revised rate will take effect. Borrowers who are concerned about affordability can ask their lenders to explain the revised repayment schedule and available options.
Why the RBI Raised the Repo Rate
The RBI’s latest decision comes amid concerns about rising inflation, elevated energy prices and global economic uncertainty. Higher crude oil prices can increase India’s import bill and put pressure on domestic prices, while currency movements can add to the cost of imported goods.
The repo rate is the interest rate at which the RBI lends short-term funds to banks against eligible securities. Changes in this rate influence borrowing conditions across the financial system, although the transmission to individual lending and deposit rates varies by bank and product.
By raising the policy rate, the RBI has signalled a greater emphasis on containing inflationary pressures. The central bank also changed its monetary policy stance from neutral to calibrated tightening, indicating that future policy decisions will depend on the evolving economic outlook and inflation trends. <Cite refs={[“turn157330search0″,”turn157330search7″,”turn157330search20”]}/>
What the Rate Hike Means for the Banking Sector
For banks, a repo-rate increase can lead to higher interest income on loans linked to the benchmark. However, the overall effect on profitability depends on how quickly lending rates adjust compared with deposit costs and other funding expenses.
Banks also need to balance loan growth with borrowers’ repayment capacity. Higher monthly payments can put pressure on household budgets and increase financial commitments for businesses that rely on credit to fund operations or expansion.
Small businesses and micro, small and medium enterprises (MSMEs) could be particularly attentive to the change if they have floating-rate working-capital facilities or other benchmark-linked borrowing. Higher financing costs may influence cash-flow management, investment decisions and plans for expansion.
At the same time, the impact will not be uniform across the banking sector. Loans tied to external benchmarks may respond more directly to the policy-rate change, while loans linked to other benchmarks can follow different revision schedules.
Deposit Rates May Not Rise at the Same Pace
While lending rates have begun adjusting, deposit rates do not necessarily increase immediately or by the same amount. Banks consider their liquidity position, funding requirements, competition for deposits and the cost of raising money when deciding whether to revise deposit rates.
Consequently, savers should not assume that a 25-basis-point increase in the repo rate will automatically lead to an equivalent rise in fixed-deposit or savings-account interest rates. Deposit-rate changes depend on individual banks’ decisions and the terms of specific products. <Cite refs={[“turn157330search5″,”turn157330search22”]}/>
Outlook for Borrowers
The latest revisions mark an important change in borrowing conditions following the RBI’s policy decision. Customers with repo-linked loans should check their applicable interest rates, upcoming reset dates and revised repayment schedules to understand the financial implications.
Prospective borrowers should also compare the total cost of borrowing, including the interest rate, processing fees and repayment conditions, before taking a new loan. Existing borrowers may discuss repayment options with their banks if higher instalments create financial pressure.
Further changes to lending rates will depend on future RBI decisions, inflation developments and the way banks manage their funding costs. For now, the 25-basis-point increase means that many customers with repo-linked loans should prepare for higher borrowing costs as the revised rates take effect.