Bank of America Securities has forecast a cumulative 100 basis points of RBI repo-rate hikes through the first half of 2027. That is not an RBI decision, but it matters to Indian car buyers because floating-rate vehicle loans could become costlier if lenders transmit higher benchmark rates.
Key takeaways
- BofA expects a 25-basis-point RBI hike at the 7 October 2026 policy meeting, followed by further increases.
- Its revised forecast is for 100 basis points of cumulative hikes through the first half of 2027, twice its earlier 50-basis-point call.
- The forecast terminal repo rate is 6.25%, but the path is conditional and can change with growth, inflation and energy prices.
- Existing borrowers should distinguish a market forecast from the reset terms written into their own loan agreement.
Illustration: FuelPrice editorial visual; generated for this article.What BofA is forecasting
In coverage published on 30 September 2026, The Times of India reported that BofA Securities had moved its expected first RBI hike forward from December to October. The brokerage expects a 25-basis-point increase at the policy meeting on 7 October 2026, followed by another 75 basis points of increases, taking its projected terminal repo rate to 6.25% in the first half of 2027.
The forecast is a view from BofA, not a confirmed policy path. The brokerage previously expected 50 basis points of total tightening. Its revised path, as reported by The Tribune through ANI on 30 September 2026, envisages 50 basis points in the fourth quarter of 2026 and another 50 basis points in the first half of 2027. BofA also expects the RBI to move to a calibrated tightening stance in December 2026.
Why the forecast changed
BofA’s case rests on a combination of resilient domestic demand and wider inflation risks. Its report pointed to oil prices of about US$100–110 per barrel through most of September 2026, stronger credit growth and signs that price pressure is spreading beyond a few food items. It cited non-food credit growth of 17.8% year on year in September 2026 and tradables inflation of 5.9% in August 2026.
The same forecast also includes conditions that could change the outcome. BofA said hikes could exceed 100 basis points if real GDP growth stays near 7% and headline inflation remains close to 5.5%. Conversely, a sharp slowdown toward 6% growth could result in fewer hikes or no hike. These are scenarios, not promises about the RBI’s next action.
What it could mean for car loans
Existing floating-rate borrowers
A repo-rate forecast does not automatically translate into an equal increase in every car loan. The effect depends on whether the loan is floating or fixed, which external or internal benchmark it uses, the lender’s spread, and the reset frequency. A lender may adjust the EMI, extend the repayment period, or use a combination of both, subject to the loan contract and applicable rules.
Borrowers can therefore read the benchmark and reset clauses before drawing conclusions from the BofA forecast. The useful comparison is the total repayment under the current rate and under a higher-rate scenario, rather than the headline repo rate alone. FuelPrice’s car-loan EMI explainer covers the parts of an offer that affect affordability.
People planning a new purchase
The forecast does not establish that car loans will become more expensive on 7 October 2026, and it is not a reason on its own to rush into or postpone a purchase. New applicants should compare the quoted interest rate, benchmark, reset rules, processing charges, foreclosure terms and the full repayment schedule. Actual offers also vary with the borrower’s profile and the lender’s underwriting.
FuelPrice previously covered a separate Nomura forecast in its earlier RBI rate-hike and car-EMI report. The BofA view is a fresh forecast with a larger projected cumulative increase, so the two calls should not be treated as a confirmed consensus.
Do not forget the running cost
Financing is only one part of the monthly cost of owning a vehicle. Fuel, insurance, tolls, maintenance and parking can change the cash flow even when the loan rate is unchanged. A buyer comparing a proposed EMI can use the fuel-cost calculator to see how the vehicle’s expected running cost sits alongside the repayment schedule.
For people already driving, the more immediate task is to separate confirmed prices from forecasts. The RBI’s official current-rates page listed the policy repo rate at 5.25% as of 25 September 2026; the BofA projection describes a possible future path from that level, not a rate already imposed on borrowers.
What to watch next
The next clear checkpoint is the RBI’s October policy decision. Until the central bank publishes its resolution, the BofA call remains reported market analysis. After any policy move, vehicle-loan customers will need to check when their lender’s benchmark resets and whether the contract changes the EMI, the tenure, or both.
Sources
- The Times of India — RBI rate hikes ahead? BofA sees 100 bps repo rate increase through H1 2027 — 30 Sep 2026
- The Tribune/ANI — RBI may raise repo rate by 100 bps through H1 2027: BofA Securities — 30 Sep 2026
- Reserve Bank of India — Current policy rates — 25 Sep 2026
This article is for general information only and is not financial, insurance or legal advice.
