RBI cuts repo to 5.25%, boosts FY26 growth outlook as liquidity and rate easing gather pace
The RBI’s Monetary Policy Committee cut the repo rate by 25 bps to 5.25% with a unanimous vote, retained a neutral stance, raised the FY26 GDP growth forecast to 7.3% and cut the FY26 CPI inflation forecast to 2%.
Key policy decisions
* Repo rate reduced from 5.50% to 5.25%, taking total easing in CY2025 to 125 bps, while stance stays neutral, keeping future moves data‑dependent.
* RBI will inject liquidity via ₹1 lakh crore of OMO purchases of government securities in December (two ₹50,000 crore auctions) and a three‑year USD/INR buy–sell swap of $5 billion.
Growth and inflation outlook
* FY26 real GDP growth estimate raised to 7.3% (from 6.8%) amid robust domestic demand, healthy investment and strong services exports, with H1 FY26 growth around 8%.
* FY26 CPI inflation forecast cut to 2% (from 2.6%), with inflation currently near 2.2%; underlying pressures excluding precious metals are even lower, leaving room for another cut if growth softens.
Market and liquidity impact
* Durable liquidity infusion of about ₹1.5 trillion via OMOs and FX swaps is aimed at improving transmission, lowering funding costs, and easing bond yields, particularly in sovereign debt.
* After the announcement, the 10‑year benchmark G‑sec yield briefly fell towards 6.47% before stabilising, while Sensex and Nifty 50 traded moderately higher, helped by a dovish, growth‑supportive signal.
Sector implications
* Commentators expect the move to be constructive for rate‑sensitive segments such as banks, NBFCs, autos and real estate, as lower rates and easier liquidity support credit growth and consumption.
* RBI stressed that policy now focuses on transmission: ensuring lending rates fall meaningfully while keeping the rupee market‑determined and external sector risks contained by adequate FX reserves.