Repo Rate cut by 25 basis point by Reserve Bank of India Monetary Policy Committee

The Reserve Bank of India (RBI) has cut its repo rate by 25 basis points from 5.5% to 5.25%. The announcement was made this morning by RBI Governor Sanjay Malhotra, who said the move aims to support economic growth despite concerns about the falling rupee.

The decision was approved unanimously after a three-day meeting of the RBI’s Monetary Policy Committee (MPC). The MPC meets every two months to review the economy and decide on interest rates. This cut comes as the RBI balances very low inflation levels with the rupee touching its lowest point yesterday.

Earlier, in June, the MPC had reduced the repo rate from 6% to 5.5% when inflation began to soften. A lower repo rate usually leads to cheaper home and car loans for consumers.

Inflation and Growth Outlook

The RBI now expects retail inflation to be lower than its earlier forecast. Underlying inflation pressures are also weaker than the headline numbers.

• Inflation for FY 2025–26 is now projected at 2%.

• For the first quarter of FY 2026–27, inflation is projected at 3.9%, lower than the earlier prediction of 4.5%.

• Rising prices of precious metals may slightly push up inflation, but overall risks are balanced, Malhotra said.

The RBI has also raised India’s GDP growth estimate for the current financial year from 6.8% to 7.3%.
For the current quarter (Q3: October–December), GDP growth is also expected to be higher at 6.7%, compared to the earlier projection of 6.4%.

In the previous quarter, GDP growth had already reached a six-quarter high of 8.2%.

Malhotra said that the balance between growth and inflation continues to give the RBI space to adjust its policies.

Key Decisions

Along with the repo rate cut, the MPC has:

• Set the Standing Deposit Facility (SDF) rate at 5%

• Set the Marginal Standing Facility (MSF) rate at 5.5%

The RBI also plans to conduct forex swaps and buy government bonds worth ₹1 lakh crore through Open Market Operations (OMOs) to support liquidity and ensure smooth monetary transmission.

2025 Review

As 2025 comes to an end, Malhotra said the year witnessed strong economic growth and low inflation, even though global geopolitical and trade uncertainties continued.

The RBI will maintain a neutral policy stance and enter the new year with “hope, energy, and determination,” he said. He added that the banking system remains financially strong, with rising credit growth and retail lending continuing to support the economy.