Bank Rate and Repo Rate: Difference and Home Loan Impact

The repo rate is the rate at which the RBI lends short-term money to banks against government securities. The bank rate is the standard rate at which the RBI rediscounts bills, and it moves with the repo rate.
 

• Repo rate: 5.25%* from 7 October 2026, up from 5.25%
• Bank rate: 5.75%, aligned with the marginal standing facility (MSF) rate
• Standing deposit facility (SDF) rate: 5.25%, which is the repo rate less 0.25 percentage point
• Home loans: the repo rate drives a repo-linked floating rate, and the bank rate does not

• Equated monthly instalment (EMI) effect: Rs. 795 more a month on Rs. 50 lakh at 8.75% against 8.50% per annum for 20 years

  
  

Ask Bajaj Finance which benchmark and reset date apply to your loan. Then read your next loan statement for the changed rate.

The bank rate and repo rate differ in purpose: the repo rate is the working rate for daily lending to banks, and the bank rate is a reference rate that follows it. The Monetary Policy Committee (MPC) votes on the repo rate, and the bank rate sits 0.25 percentage point above it.
 

The repo rate is 5.25%*, the bank rate and MSF rate are 5.75%, and the SDF rate is 5.25%. The MPC raised the repo rate by 25 basis points on 7 October 2026, up from 5.25%, and voted unanimously.
 

The MPC also changed its stance from neutral to calibrated tightening. Business Standard reports a consumer price inflation projection of 5.2% for financial year (FY) 2026-27.

The repo rate is the rate at which the RBI lends money to banks for a short period, against government securities that the bank sells and agrees to buy back. A higher repo rate makes funds costlier for banks, and a lower one reduces that cost.

A six-member MPC votes on the repo rate at its scheduled meetings. The RBI publishes the meeting dates for the year in advance. The October 2026 meeting ran from 5 to 7 October. Read the guide on what happens when the repo rate decreases for the cut side of the same mechanism.

The bank rate is the standard rate at which the RBI buys or rediscounts bills of exchange, under Section 49 of the Reserve Bank of India Act, 1934. The RBI now aligns it with the MSF rate, so it moves whenever the repo rate moves.

Routine lending no longer runs on the bank rate. It works as a signal, and the RBI uses it as a reference when a bank falls short on its reserve requirements. No home loan agreement ties your rate to it. The guide on who decides the reverse repo rate covers the other side of the corridor.

Your EMI rises only if your loan floats with the repo rate, and it changes at your reset date and not on the day of the hike. The gap between the bank rate and repo rate plays no part in that calculation. The RBI told banks to link new floating-rate retail loans to an external benchmark from 1 October 2019, and to reset the rate at least once every 3 months.

That direction covers banks. Ask Bajaj Finance whether your loan links to the repo rate, which reset date applies and whether the lender raises the EMI or lengthens the tenure. A fixed-rate loan does not move with the repo rate until its fixed period ends.

Vikram Shah, 36, lives in Surat and earns Rs. 1,85,000 a month, with a CIBIL Score of 771. He owes Rs. 50,00,000 on a floating-rate loan, with 20 years (240 months) left. His rate is 8.50% per annum, and his EMI is Rs. 43,391.

Formula used: EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the annual rate ÷ 12.

The tenure-unchanged case adds Rs. 1,90,800 over 240 months. His EMI moves from 23.5% to 23.9% of his income. Vikram asks his lender whether it raises the EMI or the tenure.

Check your loan's benchmark and reset date first, because they decide when you feel the hike. Then choose among three steps.
 

1. Keep the loan as it is, if the extra EMI fits your budget.
2. Make a part-prepayment, which cuts the principal that carries the higher rate. Check the lender's rule on the smallest amount.

3. Ask whether a fixed rate is available, and compare it with the floating rate plus any switching charge.

   
   

Trade-off: a fixed rate protects you from further hikes, but it is priced above the floating rate on the day you switch. Use the home loan EMI calculator to test each case.

The repo rate affects your Bajaj Finance loan only if your rate floats with a benchmark. Ask Bajaj Finance which benchmark your loan uses and when it resets.

The bank rate does not set your rate. Your loan statement shows the rate, the EMI and the tenure after each reset.

Approval timelines can extend where income or loan records need clarification, and minimum income thresholds can differ by city. Check your home loan eligibility before you apply.