RBI MPC Meeting 2025: Interest Rate may be decreased Further

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting will start on Monday, September 29, 2025, and continue until October 1, 2025. All decisions will be announced on the same day.

In this meeting, the RBI may cut interest rates by 25 basis points. If the RBI reduces rates, loan and interest rates may go down slightly, giving relief to the public and businesses. Cheaper loans could boost economic activity. As per report from SBI, inflation is under control and may decrease further.

The report noted that the GST rate cuts in 2019 had reduced inflation by around 35 basis points. This suggests that now is a good time to reduce interest rates.

If the RBI does not cut rates now, it could make a “Type 2 error,” which means missing the right opportunity to act. This has happened before when the RBI did not cut rates even though conditions were favorable.

GDP Growth Rate Projections

Financial Year	GDP Growth Rate (%)
Q1 FY26	6.5
Q2 FY26	6.7
Q3 FY26	6.6
Q4 FY26	6.3
FY26	6.5
FY27 (Q1)	6.6

The report highlighted that interest rate cuts have been significant since June. Therefore, the RBI needs to communicate its decisions clearly. A strong communication strategy is an important tool for the central bank.

According to the SBI report, inflation is expected to stay below 2% in September and October. By the end of FY27, inflation may remain 4% or lower. If there are changes in GST rates, inflation could drop to 1.1% in October, the lowest since 2004.

Inflation Projections

Financial Year	Earlier Inflation Projection (%)	Revised Inflation Projection (%)
Q1 FY26	2.9	2.9
Q2 FY26	3.4	2.1
Q3 FY26	3.9	3.1
Q4 FY26	4.4	4.4
FY26	3.7	3.1
FY27 (Q1)	4.9	4.9

RBI Interest Rate Decisions in 2025

• In the August 4–6 MPC meeting, the repo rate was kept unchanged at 5.5%.
• Before that, the RBI had cut the rate by 0.5% to 5.5% in June.
• RBI Governor Sanjay Malhotra said all committee members agreed to keep rates stable due to tariff uncertainty.

The repo rate is the rate at which RBI lends to banks. If the rate does not change, borrowing costs for banks and customers remain the same.

• In February 2025, the RBI cut the interest rate from 6.5% to 6.25%.
• In April, rates were cut by 0.25%.
• In June, rates were cut by 0.50%.

This means the RBI reduced interest rates by a total of 1% across three cuts in 2025.

How RBI Uses Interest Rates

• The policy rate is a powerful tool to control inflation.
• If inflation is high, the RBI increases the policy rate. This makes loans from banks more expensive, reduces money flow, lowers demand, and helps reduce inflation.
• During slow economic growth, the RBI reduces the policy rate. This makes loans cheaper, increases money flow, and encourages economic recovery.

MPC Structure and Meeting Schedule

• The MPC has 6 members: 3 from the RBI and 3 appointed by the government.
• RBI meetings are held every two months.

MPC Meetings for FY 2025–26

Meeting	Date
First	April 7–9, 2025
Second	June 4–6, 2025
Third	August 4–6, 2025
Fourth	September 29–October 1, 2025
Fifth	December 3–5, 2025
Sixth	February 4–6, 2026