NEW DELHI: The Reserve Bank of India (RBI) has cut the policy repo rate by 25 basis points to 5.25%, indicating a shift towards monetary easing as inflation stabilizes at multi-year lows. This decision was made unanimously by the Monetary Policy Committee (MPC) during its 58th meeting held from December 3-5, 2025.
With this rate cut, the standing deposit facility (SDF) rate is now at 5.00%, while the marginal standing facility (MSF) rate and the Bank Rate have been set to 5.50%. The MPC has also opted to maintain a neutral stance going forward.
Growth Outlook Remains Strong
India’s GDP surged to 8.2% in Q2 FY26, marking the highest growth in six quarters, driven by robust domestic demand, vibrant industrial and service sectors, GST rationalization, lower crude prices, and government spending strategically implemented early in the fiscal year. Investment demand is promising, backed by rising non-food credit and high capacity utilization.
The RBI anticipates GDP growth at 7.3% for FY26, forecasting 7% for Q3 and 6.5% for Q4, with Q1 and Q2 FY27 estimated at 6.7% and 6.8%, respectively. Growth risks are currently seen as balanced.
Inflation Falls Sharply
Headline CPI inflation hit a record low in October 2025, largely due to an unexpected drop in food prices. Core inflation, excluding gold, decreased to 2.6%, showcasing a widespread cooling of price pressures.
The CPI inflation for FY26 is projected at 2.0%, substantially lower than earlier estimates. The RBI predicts inflation at 0.6% in Q3 and 2.9% in Q4, rising to 3.9% and 4.0% for Q1 and Q2 FY27 as base effects subside.
Global Backdrop Remains Uncertain
Although global economic performance exceeds expectations, inflation persists above target levels in major advanced economies. The US dollar has strengthened, and equity markets are displaying volatility. India’s merchandise exports suffered a sharp decline in October amid weak external demand, although service exports proved resilient.
Industry Reactions to RBI Repo Rate Cut:
Parveen Jain, President, NAREDCO:
The RBI’s commitment to reigning in inflation and ensuring price stability is commendable. This rate adjustment will enhance liquidity and foster new investments across various sectors. For the real estate market, reduced interest rates will make home loans more accessible, benefiting homebuyers and boosting demand. This positive spin-off will extend to associated industries, generating additional employment opportunities, particularly in Tier 2 and Tier 3 cities, thus accelerating economic recovery.
Shekhar Patel, National President, CREDAI:
This reduction in the policy rate will enhance home loan affordability and strengthen buyer sentiment, especially among those waiting for a monetary easing. For developers, the decreased financing costs will improve liquidity management and support timely project executions, which are crucial in today’s demand-driven market. If banks effectively transmit this rate cut, a surge in housing sales across major cities and developing regions is likely.
Pradeep Aggarwal, Founder & Chairman, Signature Global (India):
This decision will undoubtedly bolster ongoing economic growth momentum and invigorate both demand and investment activity. The real estate industry is on a consistent growth path, bolstered by the prior cumulative repo rate reduction of 100 bps by the RBI and recent fiscal measures, which have collectively made home loans more affordable and enhanced overall buying power. We anticipate this latest rate cut to further elevate market sentiment and support sustained demand in key housing segments.
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