RBI cuts repo rate by 0.25%; Sanjay Malhotra outlines GDP, inflation projections

The Reserve Bank of India (RBI) on Friday reduced the repo rate by 25 basis points, bringing it down to 5.25 per cent. The decision was announced by RBI Governor Sanjay Malhotra following the conclusion of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5. The rate cut comes against the backdrop of robust macroeconomic performance and exceptionally low inflation levels.

RBI cuts repo rate by 25 bps to 5.25%

“The MPC met on the 3rd, 4th, and 5th of December to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 5.25 per cent, with immediate effect,” Governor Malhotra said. He added that the latest MPC meeting stands concluded.

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The rate cut follows strong economic performance, with GDP growth of 8.2 per cent in Q2 FY26 and retail inflation falling sharply to 0.25 per cent in October 2025, according to data from the Ministry of Statistics and Programme Implementation (MoSPI)—a record low.

GDP projections

FY26: Revised upwards to 7.3% from 6.8% estimated in October.

Q3 FY26: Projected at 7.0%.

Q4 FY26: Projected at 6.5%.

Q1 FY27: Projected at 6.7%.

Q2 FY27: Projected at 6.8%.

Inflation projections

FY26: Revised downwards to 2% from 2.6% in October.

Q3 FY26: Projected at 0.6%.

Q4 FY26: Projected at 2.9%.

Q1 FY27: Projected at 3.9%.

Q2 FY27: Projected at 4.0%.

Interest rates and policy stance

Repo Rate: Cut by 25 basis points to 5.25%.

Policy Stance: Remained neutral.

Liquidity measures

RBI will conduct Open Market Operation (OMO) purchases of government securities worth ₹1 lakh crore.

A three-year dollar-rupee swap of $5 billion will also be conducted.

The MPC’s December 2025 policy review aims to boost liquidity and support economic momentum while keeping inflation under control. The committee’s decision is seen as a measured response to strong GDP growth and record-low retail inflation, providing space to maintain a neutral stance while facilitating credit flow in the economy.