New Delhi: The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 5.25%, as the Monetary Policy Committee (MPC) concluded its 3–5 December meeting. The decision comes at a time when India is experiencing record-low inflation, a sharp fall in the rupee, and strong economic growth above 8%.
A Bloomberg survey of 44 economists had predicted a quarter-point cut, as inflation currently remains below the RBI’s 4% comfort target. However, several major institutions including Citigroup, Standard Chartered, and State Bank of India had expected a pause, citing currency concerns and global uncertainty.
Key Highlights from RBI Monetary Policy Committee (MPC) Meeting
- Repo rate reduced to 5.25% from 5.50%.
- Neutral policy stance maintained.
- GDP growth for FY26 revised up to 7.3% from 6.8% earlier.
- Inflation forecast lowered to 2% for FY26, compared to 2.6% projected earlier.
This repo rate cut follows two consecutive policy meetings where rates were kept unchanged. RBI Governor Sanjay Malhotra had earlier indicated that there was “definitely scope” for rate cuts, given softening inflation.
Economic Backdrop
India’s economy has shown resilience despite global headwinds, including 50% US tariff pressure, and has continued expanding at a faster-than-expected pace. However, the rupee has weakened sharply, slipping below 90 per US dollar, creating additional challenges for policy decision-makers.
Soumya Kanti Ghosh, chief economic adviser at SBI and member of the Prime Minister’s Economic Advisory Council, said that expectations of aggressive rate cuts have now cooled and that the MPC could be entering a phase of prolonged pause.
The dramatic rupee slide since the last MPC meeting complicated predictions, shifting the RBI’s approach from active currency defence to allowing a market-led adjustment amid uncertainty related to a potential India–US trade agreement.
What the Rate Cut Means
The repo rate cut is likely to:
- Lower borrowing costs for home, auto and personal loans in the coming months
- Ease pressure on businesses seeking credit
- Support continued economic growth momentum
However, continued pressure on the rupee may limit further rate reductions.
