Mumbai: The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 5.25 percent, while keeping its policy stance Neutral. The decision was made after the three-day meeting of the Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, held from December 3 to 5. This was the fifth bi-monthly meeting of FY26.
Economic Background
The MPC met at a time when India’s economy is growing strongly, inflation is at historically low levels, and the rupee is near a record low of around 90 per US dollar.
These mixed signals made the policy decision more challenging.
What Analysts Expected?
Market experts were divided on what the MPC would do-
Many analysts said that strong GDP numbers and a weak rupee pointed toward keeping rates steady. However, others argued that very low inflation made a case for the RBI to go ahead with a small cut.
Why the RBI Cut the Rate?
Some policymakers felt confident because inflation is expected to stay low in the coming months.
Even though this decision might not be unanimous, the RBI chose a forward-looking approach, supporting growth while staying cautious about the rupee.
Policy Changes So Far in 2025
Earlier in the year, the RBI had already cut rates by 100 bps across three meetings since February.
In the October policy, the MPC:
- kept the repo rate at 5.50 percent
- kept the stance Neutral
- raised FY26 GDP forecast from 6.5 percent to 6.8 percent
- reduced FY26 CPI inflation estimate from 3.1 percent to 2.6 percent
The latest 25 bps cut continues the RBI’s effort to support growth while keeping inflation under control.
