RBI slashes repo rate by 25 bps amid strong growth, cooling inflation

The Reserve Bank of India (RBI) reduced the policy repo rate by 25 basis points on Friday, bringing it down to 5.25 per cent, in a move aimed at supporting liquidity and sustaining economic momentum. The announcement was made by RBI Governor Sanjay Malhotra after the Monetary Policy Committee (MPC) concluded its three-day meeting held from December 3 to 5. The decision, taken unanimously, comes into effect immediately.

Record-Low Inflation and Strong GDP Growth

Governor Malhotra said the MPC’s verdict followed a comprehensive assessment of evolving macroeconomic indicators and future economic prospects. India’s macroeconomic environment remains robust, backed by 8.2 per cent GDP growth in the second quarter of the current financial year. 

At the same time, inflation has eased significantly, with retail inflation dropping to 0.25 per cent in October 2025, according to data from the Ministry of Statistics and Programme Implementation (MoSPI), the lowest on record.

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This favourable combination of strong growth and falling inflation reportedly created room for the central bank to adopt a more accommodative stance after months of policy stability.

Policy Shift to Support Economic Momentum

The latest move marks a shift from the October 1 monetary policy review, when the RBI chose to maintain the repo rate at 5.5 per cent. During that meeting, held from September 29 to October 1, the MPC had also unanimously voted to keep rates unchanged amid global uncertainties and domestic economic considerations.

With the current reduction, the RBI reportedly aims to inject liquidity and reinforce economic momentum as inflation continues its downward trend. The central bank expects the latest policy adjustment to bolster financial conditions and support growth in the coming quarters.