RBI Cuts Repo Rate by 25 Basis Points to 5.25%, Revises GDP Outlook

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to reduce the repo rate by 25 basis points to 5.25%. This decision was announced by RBI Governor Sanjay Malhotra on Friday. The central bank has maintained a neutral stance on monetary policy, indicating a balanced approach to economic management.

The rate cut follows two consecutive MPC meetings where the repo rate was kept unchanged at 5.5%. The Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) has been adjusted to 5%, while the Marginal Standing Facility (MSF) and bank rate have been set at 5.5%.

The economic backdrop for this decision is robust, with India’s gross domestic product (GDP) growing at 8.2% in the second quarter of fiscal year 2026. This marks the fastest pace of growth in the last six quarters. Additionally, consumer price index (CPI) inflation has eased to an all-time low of 0.25% in October, providing the RBI with the flexibility to lower interest rates without risking inflationary pressures.

The rate cut is expected to boost economic activity by making credit more affordable for businesses and consumers. It is particularly beneficial for sectors such as real estate, where lower borrowing costs can stimulate demand and investment. Venkatesh Gopalakrishnan, MD of Shapoorji Pallonji Real Estate (SPRE), welcomed the decision, stating that it will have a positive impact on the real estate sector.

The RBI’s decision to maintain a neutral stance indicates that while the central bank is supportive of economic growth, it remains vigilant about potential risks and challenges. This balanced approach is crucial in ensuring sustainable economic development and financial stability.

Looking ahead, the RBI will continue to monitor economic indicators closely. The central bank is likely to remain flexible in its policy decisions, ready to adjust rates as needed to support the economy while keeping inflation in check. The upcoming economic data and global economic conditions will play a significant role in shaping future policy decisions.

Overall, the repo rate cut by the RBI is a positive step towards fostering economic growth and stability. It is expected to have a ripple effect across various sectors, contributing to a more vibrant and resilient economy.