Published on: December 8, 2025

RBI CUTS REPO RATE

RBI CUTS REPO RATE

NEWS – The Reserve Bank of India (RBI) has reduced the policy repo rate by 25 basis points (bps), signalling cheaper loans and improved credit flow. This move comes at a time when India is experiencing decadal low inflation alongside strong GDP growth, creating what the RBI Governor describes as a “rare goldilocks period.”

 KEY POLICY DECISIONS

  • Repo Rate: Reduced from 5.50% → 5.25%
  • Standing Deposit Facility (SDF): Cut to 5%
  • Marginal Standing Facility (MSF) & Bank Rate: Reduced to 5.5%
  • Cumulative cuts since February: 125 bps (1.25%)

Impact:

  • Lower EMIs on home, auto, and personal loans
  • Improved credit availability to boost consumption and investment

WHY DID THE MPC CUT RATES?

  1. Decadal Low Inflation
  • Retail Inflation (CPI): Fell to 0.25% in October 2025
  • Quarterly Inflation (Q2 2025-26): 1.7%, below the lower tolerance band (2%)
  • Indicates benign price pressures, giving RBI policy space
  1. Strong Economic Growth
  • GDP Growth (Q2): Accelerated to 8.2%, a six-quarter high
  • Driven by:
    • High festive consumption
    • GST rationalisation
    • Strong credit demand
  1. A “Goldilocks” Scenario
  • Low inflation + high growth
  • Ideal environment for monetary easing

LIQUIDITY & FOREX MEASURES

Open Market Operations (OMO)

  • RBI to purchase ₹1 lakh crore worth of government bonds
  • Aim: Restore durable liquidity and stabilise bond yields

Dollar-Rupee Sell Swap

  • $5 billion sell swap announced
  • To stabilise the falling rupee and manage volatility

 POLICY OUTLOOK

  • Neutral stance retained
  • Future rate decisions will depend on:
    • Inflation trajectory
    • Growth trends
    • Global economic conditions