The Monetary Policy Committee (MPC) held its 58th meeting from December 3 to 5, 2025, under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The meeting was attended by Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta, and Shri Indranil Bhattacharyya. The minutes of this meeting will be published on December 19, 2025. The next MPC meeting is scheduled for February 4 to 6, 2026.
After reviewing the economic and financial situation, the MPC unanimously decided to reduce the policy repo rate under the liquidity adjustment facility to 5.25 percent. As a result, the standing deposit facility rate will be 5.00 percent, and the marginal standing facility rate and the Bank Rate will be 5.50 percent. The MPC also decided to maintain a neutral stance.
| Policy Repo Rate | 5.25% |
|---|---|
| Standing Deposit Facility Rate | 5.00% |
| Marginal Standing Facility Rate | 5.50% |
| Bank Rate | 5.50% |
| Fixed Reverse Repo Rate | 3.35% |
| CRR | 3.00% |
| SLR | 18.00% |
| Base Rate | 8.35% – 10.00% |
|---|---|
| MCLR (Overnight) | 7.80% – 7.95% |
| Savings Deposit Rate | 2.50% |
| Term Deposit Rate > 1 Year | 5.85% – 6.60% |
Growth and Inflation Outlook
The global economy is performing better than expected, though trade activity is normalising. Uncertainty has reduced due to developments like the end of the US government shutdown and progress on trade agreements, but risks remain. Inflation is uneven across major advanced economies, staying above targets in several countries. The US dollar strengthened mainly due to safe-haven demand. Treasury yields remained steady while equity markets showed volatility due to changing expectations about monetary policies and concerns over high valuations in technology stocks.
In India, real GDP grew by 8.2 percent in the second quarter of 2025 to 2026, supported by strong domestic demand. Real gross value added rose by 8.1 percent, driven by industrial and service sector growth. Economic activity benefited from GST and income tax rationalisation, lower crude oil prices, government capital spending, and supportive monetary conditions.
High-frequency indicators show steady economic activity in the third quarter, though some leading signs of weakness are emerging. GST changes and festival spending boosted demand during October and November. Rural demand remains strong and urban demand is improving. Investment activity is healthy, supported by private investment, higher non-food credit, and improved capacity utilisation. Merchandise exports declined sharply in October due to weak global demand and lower services exports. Agriculture is performing well due to better crop production, reservoir levels, and rabi sowing. Manufacturing activity is improving, and the services sector remains strong.
Domestic economic activity should continue to be supported by good agricultural prospects, GST reforms, low inflation, strong corporate and financial sector balance sheets, and favourable monetary conditions. Reforms will further help growth. Services exports are likely to stay strong while merchandise exports may face challenges. External uncertainties pose risks, but faster completion of trade negotiations could help growth. Real GDP growth for 2025 to 2026 is projected at 7.3 percent, with 7.0 percent in Q3 and 6.5 percent in Q4. Growth for Q1 2026 to 2027 is projected at 6.7 percent and 6.8 percent in Q2.
Headline CPI inflation fell to an all-time low in October 2025, mainly due to falling food prices. Core inflation remained contained despite price pressures from precious metals. Excluding gold, core inflation was 2.6 percent in October. The decline in inflation has become more broad-based.
Inflation is expected to remain soft due to favourable food supply conditions. International commodity prices, except for some metals, are expected to moderate. CPI inflation for 2025 to 2026 is projected at 2.0 percent, with 0.6 percent in Q3 and 2.9 percent in Q4. CPI inflation for Q1 2026 to 2027 and Q2 are projected at 3.9 percent and 4.0 percent. Underlying inflation pressures are even lower, as precious metals account for about 50 basis points. Risks are balanced.
Rationale for Monetary Policy Decisions
The MPC noted that inflation has eased significantly and is likely to stay lower than earlier estimates because of low food prices. Inflation projections for 2025 to 2026 and Q1 2026 to 2027 have been revised downward. Core inflation also eased slightly in Q2 and is expected to stay stable. Both headline and core inflation are expected to stay close to the 4 percent target in the first half of 2026 to 2027. Underlying inflation pressures are even lower due to the impact of precious metals being limited to around 50 basis points. While growth remains strong, it is expected to moderate slightly.
With inflation easing and growth staying resilient, the MPC decided that there is room to support growth momentum through a rate cut. Therefore, it unanimously voted to reduce the repo rate by 25 basis points to 5.25 percent and to continue with a neutral stance. However, Prof. Ram Singh suggested that the stance be changed from neutral to accommodative.
