Archive · 8 Oct 2026
RBI Says Rate Hike May Moderate Credit Growth, Support Expansion
India’s central bank raised its main interest rate by 0.25 percentage points.
This could make borrowing more expensive and may slow how quickly banks lend money.
Deputy Governor Swaminathan J said rate changes usually take about two quarters to reach borrowers’ loan rates.
Bank lending has been growing by more than 18%, faster than its 12–14% average over the past decade.
Officials said lending can slow somewhat and still help the economy grow.
Governor Sanjay Malhotra said credit growth should remain strong and small changes in its pace are not a major concern.
He also said the central bank is not expected to cut rates soon.
The RBI will consider India’s growth and inflation, as well as global conditions, when making decisions.
The Reserve Bank of India raised the repo rate by 0.25 percentage points and shifted its policy stance to “calibrated tightening.”
Deputy Governor Swaminathan J said credit growth may ease from its current level above 18%, while remaining adequate to support economic growth.
Swaminathan said it typically takes about two quarters for rate changes to affect borrowers’ lending rates; credit growth’s 10-year average is 12–14%.
Governor Sanjay Malhotra said credit growth should remain strong, and that small changes in its pace would not greatly affect the overall picture.
Officials said domestic growth and inflation will guide policy, and Malhotra said near-term rate cuts should not be expected.
- Who
- The Reserve Bank of India, including Governor Sanjay Malhotra and Deputy Governor Swaminathan J.
- What
- The RBI raised the repo rate by 0.25 percentage points and said credit growth could moderate while remaining supportive of economic growth.
- When
- Wednesday, October 7, 2026.
- Where
- India.
- Why
- The RBI said domestic growth and inflation guide its policy decisions, while global factors are also considered.
Potential costs
Continued growth
Effects of higher rates
Potential costs
Bankers said higher rates could raise borrowing costs, with implications for home-loan borrowers and small businesses; NBFC funding costs could also rise gradually.
Continued growth
RBI officials said some moderation in credit growth would still be adequate to support economic expansion, and the governor expected credit growth to remain strong.
- Repo rate change
- Raised by 0.25 percentage points
- Policy stance
- Changed to “calibrated tightening”
- Current credit growth
- More than 18%
- Ten-year average credit growth
- 12–14%
- Rate transmission
- Typically takes about two quarters to reach borrowers’ lending rates
- FY27 real GDP growth
- Revised by the RBI to 7.1%, according to the second article
- Near-term rate cuts
- Malhotra said people should not expect cuts in the near term
