Mumbai, December 5: India’s Monetary Policy Committee (MPC) on Friday cut the benchmark repo rate by 25 basis points to 5.25%, its fourth reduction under Reserve Bank of India Governor Sanjay Malhotra, as easing inflation and strong economic growth created room for monetary accommodation.
The rate cut, decided unanimously, takes the total reduction in the policy rate to 125 basis points since Malhotra took office in December 2024.
The RBI said the move was prompted by data showing real economic growth accelerated to 8.2% in the second quarter while headline inflation eased sharply to an average of 1.7%, slipping below the central bank’s lower tolerance band of 2% for its 4% inflation target.
“With headline inflation easing significantly and expected to remain softer than earlier projections, primarily due to exceptionally benign food prices, the MPC decided to reduce the policy rate,” Malhotra said in his statement.
The central bank maintained its neutral policy stance, signalling that future rate moves will depend on evolving economic conditions. Following the cut, the standing deposit facility rate was adjusted to 5.00%, while the marginal standing facility rate and the Bank Rate were revised to 5.50%.
The RBI said the reduction in borrowing costs is expected to translate into lower lending and deposit rates across the financial system. The MPC also projected India’s GDP growth for fiscal year 2025–26 at 7.3%, citing robust domestic demand and improving investment activity.
