The Reserve Bank of India (RBI) on Thursday reduced the repo rate by 25 basis points to 5.25%, marking its second rate cut this financial year. RBI Governor Sanjay Malhotra announced the decision after the conclusion of the Monetary Policy Committee’s (MPC) three-day deliberations.
The move, backed unanimously by the six-member MPC, comes amid easing inflation and a weakening rupee, which touched a fresh low on Wednesday. The panel had previously lowered the benchmark lending rate from 6% to 5.5% in June as price pressures softened.
A reduction in the repo rate is expected to bring relief to retail borrowers through lower EMIs as banks gradually transmit the cut to loan rates.
2025 Review: Growth Holds Firm Despite Uncertainty
In his final policy statement of the year, Governor Malhotra noted that 2025 delivered strong economic momentum with manageable inflation levels, even as global geopolitical and trade tensions persisted. Maintaining a neutral policy stance, he said the central bank remains prepared for the challenges and opportunities of the upcoming year.
Inflation and Growth Outlook
The RBI now expects retail inflation to remain lower than earlier projected, citing easing underlying price pressures. The central bank revised the CPI inflation forecast for FY2025-26 to 2%, reflecting its confidence in sustained price stability.
On the growth front, the RBI raised its GDP forecast for FY2025-26 to 7.3%, up from 6.8%. The estimate for the October–December quarter has also been lifted to 6.7% from 6.4%.
Malhotra said the favourable balance between growth and inflation continues to provide adequate room for policy adjustments.
Key Policy Decisions
Alongside the repo rate cut, the MPC announced the following adjustments:
- Standing Deposit Facility (SDF): Reduced to 5%
- Marginal Standing Facility (MSF): Trimmed to 5.5%
In addition, the RBI will conduct Open Market Operations (OMO) to purchase government securities worth ₹1 lakh crore, a move aimed at supporting liquidity conditions in the financial system.
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