RBI Cuts Repo Rate by 0.25 Percentage Point, Raises GDP Growth Forecast

Mumbai, 5 December: The Reserve Bank of India on Friday reduced the key policy repo rate by 0.25 percentage point to 5.25 percent after reviewing macroeconomic conditions and global factors. The move comes amid strong economic growth and easing inflation.

As per agency report, the RBI also revised its GDP growth estimate for the current financial year from 6.8 percent to 7.3 percent, while the inflation forecast was lowered from 2.6 percent to 2 percent.

With the latest reduction, the repo rate has been cut by a total of 1.25 percentage points in 2025. Earlier, the central bank had reduced the rate by one percentage point between February and June this year. In the monetary policy reviews held in August and October, the repo rate was kept unchanged at 5.5 percent.

RBI Governor Sanjay Malhotra, sharing details of the decisions taken during the three-day meeting of the six-member Monetary Policy Committee, said the committee unanimously decided to lower the repo rate to 5.25 percent and retain the stance of monetary policy as neutral. This indicates that the central bank will remain flexible in adjusting policy rates based on economic conditions.

The repo rate is the interest rate at which commercial banks borrow funds from the central bank to meet short-term requirements. A reduction in the repo rate increases the likelihood of changes in interest rates on loans such as housing and vehicle finance.

For the financial year 2025–26, the RBI has increased the GDP growth forecast from 6.8 percent to 7.3 percent, while the retail inflation projection for the current fiscal has been revised downward to 2 percent from the earlier estimate of 2.6 percent.