RBI Repo Rate News: The Reserve Bank of India’s (RBI) monetary policy committee (MPC) has decided unanimously to cut the key repo rate by 25 bps to 5.25% in its December 2025 bi-monthly monetary policy, Governor Sanjay Malhotra announced on Friday. Experts were divided between the status quo and a rate cut. The decision has been taken unanimously, while the RBI MPC’s policy stance remains ‘neutral’.
Announcing the fifth bi-monthly policy review of FY26, Malhotra said, “Since the October 2025 policy, the economy has seen significant disinflation… Look back at the year with satisfaction, current growth inflation dynamics show rare goldilocks period, growth continues to remain strong."
The RBI also cut the standing deposit facility (SDF) by 25 basis points (bps) to 5.25 per cent, as well as marginal standing facility (MSF) and bank rates to 5.50 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
The RBI rate cut decision comes days after the Indian economy posted a strong GDP growth of 8.2% in the second quarter and the first half of the current financial year. However, inflation figures on the retail side were well below the RBI mandate, due to which many economists had expected a cut in interest rates.
In view of the prevailing liquidity conditions, the Reserve Bank of India will undertake Open Market Operations (OMO) worth Rs 1 lakh crore.
OMOs involve the RBI buying or selling government securities in the open market to modulate liquidity and influence the overall money supply in the banking system.
During his policy statement, the RBI governor on Friday said India’s forex reserves stood at $686 billion, sufficient to cover 11 months of imports.
He also added that current account deficit to remain ‘modest’ in the current financial year 2025-26.
FY26 GDP Growth Forecast Raised To 7.3% Vs 6.8% Earlier
The RBI on Friday revised upwards its GDP forecast for FY26 to 7.3%, from 6.8% earlier.
FY26 Inflation Lowered To 2% Vs 2.6% Earlier
The RBI has also lowered its inflation projection for FY26 to 2%, from 2.6% earlier.
