The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday voted unanimously to cut the policy repo rate by 25 basis points to 5.25 per cent, citing a sharp decline in inflation and greater policy space to support growth. The MPC also voted to maintain a neutral stance.
With the revision, the Standing Deposit Facility (SDF) rate stands at 5 per cent, while the MSF / Bank Rate move to 5.5 per cent.
RBI Governor Sanjay Malhotra said the rate cut comes against the backdrop of rapid disinflation, with average headline inflation in Q2 easing to 1.7 per cent —the first time it has breached the lower end of the 2–6 per cent tolerance band since flexible inflation targeting began.
Inflation fell further to 0.3 per cent in October 2025, driven largely by exceptionally benign food prices, Malhotra said.
The central bank now expects both headline and core inflation to remain at or below 4 per cent in the first half of next year, with additional comfort from the fact that part of the current inflation reading (around 50 basis points) is due to higher precious metal prices rather than broad-based pressures.
On growth, Malhotra said the economy remains resilient, with GDP rising 8.2 per cent in Q2 on the back of strong festive demand and GST rate rationalisation. However, activity is expected to soften marginally, strengthening the case for policy support.
“The benign inflation outlook on both headline and core provides the policy space to support the growth momentum,” Malhotra said, adding that the MPC therefore voted unanimously for the 25 bps cut.
To ensure adequate liquidity, the RBI also announced open market purchases of government securities worth ₹1 lakh crore and a three-year $5-billion dollar–rupee swap during December.
In its October 2025 meeting, the RBI’s MPC had left policy rates unchanged and maintained a neutral stance.
