In a significant boost for borrowers, the Reserve Bank of India on Friday cut the repo rate by 25 basis points to 5.25 per cent, making housing, auto and commercial loans cheaper.
Announcing the fifth bi-monthly monetary policy, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously agreed to reduce the short-term lending rate while maintaining a neutral stance. The move comes despite concerns over the rupee’s sharp depreciation, which crossed 90 against the US dollar earlier this week.
The rate cut follows three consecutive months of CPI-based retail inflation staying below the government’s mandated lower band of 2 per cent. India’s retail inflation hit a historic low of 0.25 per cent in October 2025 — the lowest since the CPI series began. At the same time, GDP growth surged to a six-quarter high of 8.2 per cent in Q2, strengthening the case for monetary easing.
Although the weakening rupee has made imports more expensive and raised fears of inflationary pressures, the RBI has revised its full-year growth projection upward to 7.3 per cent from the earlier estimate of 6.8 per cent.
This is the fourth rate cut of the year, following reductions of 25 bps each in February and April and a 50 bps cut in June as inflation continued to soften. Retail inflation has remained below 4 per cent since February, helped by easing food prices and a favourable base effect.
The central bank continues to be guided by its mandate of keeping inflation at 4 per cent with a tolerance band of ±2 per cent, even as it attempts to support the economy amid global uncertainty.
