Fed rise, $116 oil and $119.2 billion of non-resident deposit inflows: the global backdrop to the RBI's October policy

On 7 October 2026 the RBI's Monetary Policy Committee voted 6 to 0 to raise the repo rate by 25 basis points to 5.50 per cent and changed its stance to calibrated tightening, with two members preferring to stay neutral. The SDF rate is now 5.25 per cent and the MSF rate and Bank Rate 5.75 per cent; no change to the CRR was announced. The Governor's address was streamed live from 9:45 am IST, and our full report on the rate decision covers those basics.

This piece looks at the other half of the RBI's documents: what the central bank says about the world outside India, and how that shows up in the country's oil bill, its foreign deposits and its reserves.

A tighter world

The resolution says the re-escalation of the conflict in West Asia since the August meeting, and the sharp swings in crude oil prices that followed, have kept the global economy in flux. Global growth has held up, it says, but faster inflation in key economies has pushed central banks towards tighter policy.

The US Federal Reserve raised rates by 25 basis points in September, a move we covered alongside the latest US jobs figures. The RBI says the Fed's comments since then, together with tightening by other major central banks, have reinforced expectations of higher global policy rates, and that global bond yields are at record highs.

In his statement, Governor Sanjay Malhotra said global growth is projected to slow in 2026 from the previous year while global inflation is projected to rise sharply. He listed lingering trade uncertainty, rising bond yields in advanced economies and a stronger dollar as reasons markets remain nervous, and named uncertainty over the valuation of AI stocks among the downside risks.

Oil at $116 a barrel

The oil numbers sit in the footnotes. Citing the Petroleum Planning and Analysis Cell, the RBI says the Indian basket of crude averaged US$ 82.0 a barrel in July, US$ 90.2 in August and US$ 116.1 in September. Brent front-month prices in September were 22 per cent higher on average than in July and 15 per cent higher than in August.

That feeds into trade. India's merchandise trade deficit widened to US$ 58.7 billion in July and August 2026 from US$ 55.1 billion a year earlier, mainly on imports of electronic goods and crude oil. Imports of petroleum, crude and products rose 21.3 per cent to US$ 35.0 billion. The current account deficit was 0.5 per cent of GDP in the April to June quarter, and the RBI lists elevated energy prices among the upside risks to it this year.

It also feeds into prices. CPI inflation was 4.8 per cent in August, and the RBI now projects 5.2 per cent for 2026-27, up from 5.0 per cent in August, with 6.0 per cent in the October to December quarter. Its growth projection for the year was raised to 7.1 per cent from 6.7 per cent.

Money from Indians abroad

The most striking external figure concerns deposits held by non-residents. Net inflows under non-resident deposits reached US$ 119.2 billion in April to August 2026, against US$ 5.6 billion a year earlier. The Governor said system liquidity rose substantially in August and September because of measures taken to attract capital inflows, and a footnote links lower bulk deposit rates to a surge in liquidity from the mobilisation of FCNR(B) deposits.

Remittances are rising too. Net transfers, mainly workers' remittances, were US$ 53.9 billion in April to July 2026, compared with US$ 43.4 billion a year earlier. Net foreign direct investment inflows were US$ 13.8 billion in April to August, up from US$ 9.6 billion, while foreign portfolio investors took out a net US$ 10.3 billion between April and 5 October. The RBI expects the balance of payments to show a healthy surplus in 2026-27.

Foreign exchange reserves stood at US$ 734.6 billion on 2 October. The RBI puts that at around 11 months of import cover and 94.4 per cent of external debt, and says it remains committed to orderly exchange-rate adjustment in line with fundamentals.

The non-rate measures

Two measures came with the policy. NBFC account aggregators will become interoperable, so customers can gather and share their financial information through any aggregator they choose. SEBI-regulated depositories will be able to include bank deposit account details in the consolidated account statement, so demat holders can see both in one place. Both are expected by 31 December 2026.

The RBI will also set up a Technical Consultative Committee for Financial Markets, a forum for structured engagement with market participants on money, government securities and foreign exchange markets and their derivatives. Its members and terms will be notified separately.

The minutes of this meeting are due on 21 October 2026, and the next MPC meeting is set for 2 to 4 December 2026. Banks set their own lending and deposit rates. This is information, not advice.