RBI repo rate cut 2025: The Reserve Bank of India (RBI) has recently announced a major monetary policy update, bringing exciting news for borrowers, investors, and the overall economy. RBI Governor Sanjay Malhotra, in his speech on December 5, 2025, highlighted the rapid economic growth, historically low inflation, and measures to support liquidity and financial stability.
Repo Rate Cut and Monetary Policy Decisions
The RBI’s Monetary Policy Committee (MPC) has unanimously decided to reduce the policy repo rate by 25 basis points to 5.25%. The standing deposit facility (SDF) rate is now 5%, and the marginal standing facility (MSF) rate and Bank Rate stand at 5.50%. The central bank continues with a neutral stance, signaling that future rate changes will be guided by inflation and growth trends.
To support liquidity, RBI has also announced Open Market Operations (OMO) purchases of government securities worth ₹1,00,000 crore and a 3-year USD/INR Buy-Sell Swap of USD 5 billion. These measures ensure durable liquidity in the system and enhance smooth monetary transmission.
Economic Growth and Inflation Outlook
India’s economy is in a “goldilocks zone” – strong growth combined with low inflation. Real GDP growth reached 8.2% in Q2 of 2025-26, driven by strong festive season spending, GST rationalization, and healthy industrial and service sectors. Inflation has dipped to an unprecedented low of 0.3% in October 2025, largely due to soft food prices. Core inflation, excluding food and fuel, also remains contained at 2.6%.
Looking ahead, GDP growth for 2025-26 is projected at 7.3%, with expectations of 6.7–6.8% growth in early 2026-27. Meanwhile, CPI inflation is expected to stay around 2% for the year, remaining below the RBI’s 4% target. The central bank highlighted that the decline in inflation gives ample room to support economic growth.
External Sector and Financial Stability
India’s current account deficit has improved to 1.3% of GDP in Q2, supported by robust services exports and strong remittances. Foreign investment flows remain strong, with foreign exchange reserves at $686.2 billion, covering more than 11 months of imports. Bank credit growth is steady, supported by lending to retail, services, MSMEs, and large industries. Non-banking financial companies (NBFCs) also maintain a healthy capital and asset quality position.
Customer Services and Additional Measures
RBI continues to focus on improving customer experience with initiatives like Re-KYC, financial inclusion, and grievance redress campaigns. Starting January 2026, a two-month campaign will aim to resolve all complaints pending for over a month with the RBI Ombudsman.
Conclusion
RBI Governor Sanjay Malhotra’s speech emphasizes that India’s economy is resilient, with strong growth and low inflation. The repo rate cut, supportive liquidity measures, and continued financial reforms are aimed at ensuring a stable and growth-friendly economic environment.
