RBI Cuts Repo Rate To Boost Growth
The RBI repo rate cut of 25 basis points to 5.25% was announced on Friday by RBI Governor Sanjay Malhotra. The Monetary Policy Committee (MPC) voted unanimously after a three-day meeting. The central bank said the move aims to support growth at a time when retail inflation remains soft.
The repo rate stood at 5.5% before today’s cut. Moreover, the decision signals a shift toward growth-supportive policies even as the rupee faces pressure. The currency touched a record low yesterday. However, the RBI believes domestic fundamentals remain strong.
A repo rate cut normally leads to lower EMIs for home and vehicle loans. Therefore, retail borrowers will likely see cheaper loans soon. Banks are expected to adjust lending rates in the coming weeks as monetary transmission improves.
The MPC last reduced the repo rate in June when the rate moved from 6% to 5.5%. That cut was also driven by easing inflation.
Inflation Outlook Improves Further
Inflation trends shaped today’s RBI repo rate cut. The central bank expects retail inflation to stay below earlier projections. Malhotra said underlying inflation pressures remain soft and balanced.
The Consumer Price Index (CPI) forecast has been revised sharply. CPI inflation is now projected at 2% for FY2025-26. The earlier estimate was higher. Additionally, inflation for the first quarter of FY2026-27 is set at 3.9%, lower than the previous 4.5% projection.
Rising precious metal prices could add to headline inflation. However, risks to inflation remain evenly balanced, according to the governor.
The comfortable inflation outlook gives the RBI more room to support growth. The central bank said the growth-inflation balance continues to provide useful policy space.
GDP Forecast Raised As Economy Shows Strength
India’s economy remains resilient. Therefore, the RBI raised its GDP growth forecast for the current financial year. The estimate now stands at 7.3%, up from 6.8%. The forecast for the October–December quarter is also stronger at 6.7%.
The previous quarter recorded GDP growth of 8.2%, the highest in six quarters. Additionally, bank credit continues to rise across sectors. Retail lending remains strong and supports broader consumption demand.
Malhotra noted that robust domestic growth led to today’s policy stance. Moreover, he stressed that India entered the last month of 2025 with stability and optimism despite global uncertainty.
Key Policy Decisions Announced Today
Besides the RBI repo rate cut, the MPC also revised other policy instruments. The Standing Deposit Facility (SDF) rate is now 5%. The Marginal Standing Facility (MSF) rate stands at 5.5%. These changes aim to strengthen liquidity conditions.
The RBI also announced major market interventions. It will conduct forex swaps and buy bonds worth ₹1 lakh crore through Open Market Operations (OMO). These steps are expected to boost liquidity and aid monetary transmission.
The central bank said financial parameters remain strong. Moreover, the banking system continues to show healthy credit growth as 2025 ends.
RBI Wraps Up 2025 With Positive Outlook
Governor Malhotra said 2025 delivered strong growth and stable inflation despite global volatility. Geopolitical and trade tensions persisted through the year. However, India stayed on a steady path due to resilient domestic demand and prudent policies.
The RBI’s stance remains neutral. Additionally, the central bank plans to enter 2026 with a balanced view, new tools, and firm confidence.