The Reserve Bank of India (RBI) has reduced the repo rate by a cumulative 100 basis points during fiscal year 2025-26, bringing it down to 5.25% by December 2025. This marks a significant shift towards accommodative monetary policy aimed at spurring economic growth.
The rate cuts were enabled by a benign inflation environment, with the Consumer Price Index (CPI) softening to 0.71% in November 2025. The RBI expressed confidence in the strength and resilience of India’s financial system despite global uncertainties.
In its latest Financial Stability Report released in December 2025, the central bank highlighted the robust health of the banking sector and the economy’s ability to withstand external shocks. The lower interest rates are expected to boost credit growth and investment.
For the first half of 2026-27, the RBI assesses growth at 6.8%, with the full year likely to be in the range of 6.5-6.8%. These projections underscore the central bank’s optimism about India’s economic trajectory.
Market analysts believe the rate cuts will stimulate demand in housing, automobiles, and consumer durables sectors, while also supporting corporate borrowing and capital expenditure plans.
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