RBI MPC Meet: What the 5.25% Repo Cut Means - Big Takeaways You Can’t Miss

In a widely anticipated move, the Reserve Bank of India’s Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, declared a 25-basis-point rate cut on Friday, bringing the policy repo rate down to 5.25% with immediate effect. The six-member panel voted unanimously for the reduction while retaining a “neutral” stance.

RBI Governor Sanjay Malhotra during Monetary Policy Statement struck an upbeat tone on India’s economic resilience amid global headwinds.

“Despite an unfavourable and challenging external environment, the Indian economy has shown remarkable resilience and is poised for high growth. The headroom provided by the inflation outlook has allowed us to remain growth-supportive,” the Governor said.

Historic Disinflation and Goldilocks Moment

The standout highlight was the dramatic cooling of prices. Headline CPI inflation plunged to an all-time low in October 2025, with the latest print coming in at just 0.3%. For the full financial year, the RBI sharply revised its inflation projection downward to 2% from the earlier 2.6%.

“We look back at the year so far with satisfaction. The economy witnessed robust growth and benign inflation… Inflation at a benign 2.2% and growth at 8% for the first half of the year presents a rare Goldilocks period,” Malhotra noted.

Growth Outlook Upgraded

Real GDP growth for FY 2025-26 has now been pegged at 7.3%, higher than previous estimates. The quarter-wise trajectory shows:

Q3 FY26: 7.0%
Q4 FY26: 6.5%
Q1 FY27: 6.7%
Q2 FY27: 6.5%

The Governor attributed the second-quarter acceleration to 8.2% to strong festive spending and the rationalisation of GST rates.

External Sector Remains Resilient

Despite a wider merchandise trade deficit in October, strong services exports, remittances, and robust gross FDI inflows kept the overall external position comfortable. India’s forex reserves stood at $686 billion as of November 28, providing more than 11 months of projected import cover.

Liquidity Boost Announced

To ensure durable liquidity and better transmission of the rate cut, the central bank unveiled two major measures:

Open Market Operation (OMO) purchases of government securities worth ₹1 lakh crore this month.
A three-year dollar-rupee buy-sell swap of $5 billion.

Malhotra clarified the distinction: “OMO purchase/sale provides or absorbs durable long-term liquidity, while LAF operations like VRR/VRRR manage transient short-term liquidity.”

Global Backdrop and Future Path

The Governor flagged continuing geopolitical risks, divergent central bank actions in advanced economies, and conflicting signals in global equity markets; torn between AI-driven optimism and stretched valuations.

Yet, he reiterated that contained inflationary pressures in emerging markets, including India, have created policy space. “We will continue to meet the productive requirements of the economy proactively while ensuring macroeconomic stability,” Malhotra concluded.

With the repo rate now at its lowest in over a decade and inflation comfortably below the 4% target, markets will watch closely whether this marks the beginning of a fresh easing cycle or a one-off adjustment in an otherwise “neutral” framework.

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