The Reserve Bank of India’s Monetary Policy Committee (MPC) has unanimously voted to cut the repo rate by 25 basis points, bringing it down to 5.25%. The decision, announced by RBI Governor Sanjay Malhotra on December 5, 2025, comes amid sharp disinflation trends observed since the October policy review.
Governor Malhotra noted that inflation has eased to record-low levels, allowing policy space for rate easing while continuing to support economic growth. The committee has retained its policy stance as neutral.
The move surprised markets, as most analysts expected the RBI to maintain the policy rate unchanged for the remainder of the calendar year. In fact, nine out of thirteen economists surveyed ahead of the announcement had forecast no rate change.
Top 5 Highlights from the RBI MPC Outcome
| Key Aspect | Announcement | Notes |
| Repo Rate | Reduced to 5.25% | 25 bps cut |
| Policy Stance | Neutral | Indicates flexibility in future policy moves |
| Inflation Outlook | Improved | Driven by sharp fall in food and fuel inflation |
| Growth Projection | Maintained | GDP outlook remains broadly unchanged |
| Market Expectations | Rate cut surprised analysts | Majority had expected status quo |
Market and Economic Context
The rate reduction reflects confidence in India’s macroeconomic stability, with disinflation progressing faster than anticipated. The central bank expects the rate cut to support credit growth, reduce borrowing costs, and further strengthen the momentum in consumption and investments.
However, the RBI also emphasized vigilance, citing potential risks arising from global crude prices, climate-linked food price shocks, and geopolitical tensions.
Summary
- Repo rate reduced to 5.25% after a 25 bps cut by the MPC.
- Decision was unanimous, and the neutral stance is retained.
- Inflation has dropped sharply, giving RBI room for policy easing.
- The move was unexpected, as most market experts anticipated no change.
- The rate cut aims to support domestic demand and economic growth momentum.
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