The Reserve Bank of India (RBI) reduced its key policy rate, the repo rate, by 25 basis points to 5.25%, today. The decision was unanimously approved by the six-member Monetary Policy Committee (MPC), which retained a “neutral” monetary stance, leaving room for further policy adjustments if required.
The move comes amid strong economic performance. India’s GDP grew 8.2% in the second quarter, the fastest pace in six quarters, while inflation remained subdued, with the consumer price index (CPI) at just 0.25% in October. The combination of rapid growth and low inflation gave the RBI confidence to ease borrowing costs without risking price instability.
Along with the rate cut, the RBI announced additional liquidity measures to support the financial system. These include open-market operations worth ₹1 lakh crore in December and foreign exchange swap operations of up to $5 billion. These steps aim to improve credit flow and ensure that businesses and households can benefit from lower lending costs.
The policy easing is expected to boost borrowing across sectors, including housing, automobiles, and corporate finance. Financial, real estate, and auto stocks led market gains following the announcement. Analysts say the RBI’s move reflects a careful balance between fostering economic growth and maintaining price stability, while reinforcing investor confidence and the health of India’s financial system.
