RBI Monetary Policy: Central Bank Cuts Repo Rate by 25 bps to 5.25% Amid Rupee Slide

The Reserve Bank of India on Friday cut the repo rate by 25 basis points to 5.25%, as the Monetary Policy Committee weighed record-low inflation against a sharply weakening rupee and an economy still growing above 8%.

A Bloomberg survey of 44 economists had largely predicted a quarter-point cut, given inflation remains well below the 4% target. But with the rupee plunging past ₹90 per dollar and growth staying robust, several major institutions—including Citigroup, Standard Chartered and SBI—expected the RBI to hold rates steady.

Key MPC Decisions (Dec 3–5 Meeting)

• Repo rate cut: 25 bps to 5.25%

• Policy stance: Neutral

• FY25 GDP forecast: Raised to 7.3% from 6.8%

• FY26 inflation forecast: Cut to 2% from 2.6%

The central bank had kept rates unchanged for two consecutive meetings. RBI Governor Sanjay Malhotra had signalled last month that there was “definitely scope” for cuts, but fresh data since then showed India’s economy holding firm despite steep U.S. tariffs—while the rupee slid sharply.

This combination had led many economists to expect a pause, with SBI’s chief economic adviser Soumya Kanti Ghosh saying the case for cuts had “faded” and the RBI appeared headed for a prolonged hold.

The rupee’s steep decline since the last MPC meeting added to the uncertainty. The RBI, which had earlier defended the currency aggressively, allowed it to slip beyond 90 this week amid doubts over an India–U.S. trade agreement.