Daijiworld Media Network - Mumbai

Mumbai, Dec 5: The Reserve Bank of India (RBI) on Friday announced a 25-basis-point reduction in the policy repo rate, bringing it down to 5.25%, following a three-day Monetary Policy Committee (MPC) meeting. Consequently, the Standing Deposit Facility (SDF) rate has been revised to 5%, while the Marginal Standing Facility (MSF) rate and Bank Rate now stand at 5.5%.

RBI Governor Sanjay Malhotra explained that the decision was driven by a favourable growth-inflation balance and a benign inflation outlook, providing the central bank the flexibility to support growth momentum. The MPC maintained a neutral policy stance, reflecting the RBI’s approach to balance price stability with growth support.

Economists welcomed the move. Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said, “The repo rate cut, along with liquidity easing measures, is in line with expectations. With RBI leaving room for further easing, another 25 bps cut cannot be ruled out, with the terminal rate likely at 5% followed by a prolonged pause.”

The MPC also revised India’s GDP forecast for FY26 upwards to 7.3%, from the earlier 6.8%, driven by strong economic momentum. GDP growth in Q2 FY26 (July-September) accelerated to 8.2%, marking one of the fastest quarterly expansions in recent years.

Inflation projections were also updated. The MPC lowered the FY26 inflation target to 2%, down from 2.6% in October, citing a sharp deceleration in retail inflation, which recently hit a multi-decade low of 0.25%, aided by falling food prices and GST cuts on consumer goods. Quarterly inflation projections stand at 0.6% for Q3, 2.9% for Q4, 3.9% for Q1 FY27, and 4.0% for Q2 FY27.

The RBI’s latest move reflects its efforts to stimulate growth while keeping inflation under check, in a climate of easing price pressures and robust economic activity.