RBI Monetary Policy December 2025 - RBI Cuts Repo Rate to 5.25%

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RBI MPC December 2025 Decisions

The committee unanimously cut the repo rate by 25 bps to 5.25%.
SDF was adjusted to 5.00%, and MSF/Bank Rate to 5.50%.
The stance remains neutral, though one member suggested moving to an accommodative stance.

India’s GDP grew 8.2% in Q2 of FY26, driven by robust domestic demand, industry and services.
GST rationalisation, lower crude prices and strong government capex supported activity.
High-frequency indicators show steady domestic demand, healthy rural consumption and improving private investment.
Some external softening is visible, with merchandise exports dipping in October.
RBI projects 7.3% GDP growth for 2025-26, with risks evenly balanced.

CPI inflation touched an all-time low in October 2025, driven by an unusual drop in food prices.
Core inflation stayed contained; excluding gold, it eased to 2.6%.
Broad-based moderation leads RBI to project 2.0% inflation for 2025-26, lower than earlier estimates.
Inflation is expected to return close to the 4% target in the first half of 2026-27.

A sharp and generalised fall in inflation created room for policy easing.
Both headline and core inflation are expected to stay within comfortable levels.
Growth is strong but may moderate slightly, making a supportive monetary stance appropriate.

The rate cut signals easier financial conditions, which could reduce borrowing costs for businesses over the coming quarters.

Improving credit flows and a neutral policy stance may help sustain private investment, especially in manufacturing and services.

With inflation projected to remain low, companies can plan production and pricing with greater certainty.

[1] RBI

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