The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), in its meeting held from December 3–5, 2025, unanimously voted to cut the policy repo rate by 25 basis points to 5.25%, effective December 5, 2025. The Standing Deposit Facility (SDF) rate was adjusted to 5.00%, and the Marginal Standing Facility (MSF) rate and Bank Rate to 5.50%. Five of the six MPC members voted to maintain the 'neutral' policy stance. The rate cut was the fourth reduction in 2025, after pauses in the previous two policy meetings, bringing borrowing costs down from 6.50% in February 2025 to 5.25% by December — the most aggressive monetary easing in India since 2019. The MPC revised the CPI inflation forecast for FY2025–26 downward by 60 basis points to 2.0% — a record low, driven by a strong kharif harvest, benign global commodity prices, and effective supply-side interventions. Simultaneously, the GDP growth projection for FY2025–26 was upgraded from 6.8% to 7.3%. RBI Governor Sanjay Malhotra, who succeeded Shaktikanta Das in December 2024, guided the committee's decision with a growth-supportive stance. The rate cut is expected to lower EMIs for home, vehicle, and personal loans; reduce the cost of credit for MSMEs and the agriculture sector; and stimulate private investment that has been subdued. Critics cautioned that the ultra-low inflation reading — 2% CPI — may be temporary, and that premature aggressive easing could create inflationary pressures if global supply chains face disruption. The next MPC meeting was scheduled for February 4–6, 2026.
RBI Monetary Policy Committee Cuts Repo Rate by 25 bps to 5.25% (December 5, 2025): India's Most Aggressive Easing Since 2019 Aims to Boost Growth Amid Record-Low Inflation
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), in its meeting held from December 3–5, 2025, unanimously voted to cut the policy repo rate by 25 basis points to 5.25%, effective December 5, 2025. The Standing Deposit Facility (SDF) rate was adjusted to 5.00%, and the Marginal Standing Facility (MSF) rate and Bank Rate to 5.50%. Five of the six MPC members voted to maintain the 'neutral' policy stance. The rate cut was the fourth reduction in 2025, after pauses in the previous two policy meetings, bringing borrowing costs down from 6.50% in February 2025 to 5.25% by December — the most aggressive monetary easing in India since 2019. The MPC revised the CPI inflation forecast for FY2025–26 downward by 60 basis points to 2.0% — a record low, driven by a strong kharif harvest, benign global commodity prices, and effective supply-side interventions. Simultaneously, the GDP growth projection for FY2025–26 was upgraded from 6.8% to 7.3%. RBI Governor Sanjay Malhotra, who succeeded Shaktikanta Das in December 2024, guided the committee's decision with a growth-supportive stance. The rate cut is expected to lower EMIs for home, vehicle, and personal loans; reduce the cost of credit for MSMEs and the agriculture sector; and stimulate private investment that has been subdued. Critics cautioned that the ultra-low inflation reading — 2% CPI — may be temporary, and that premature aggressive easing could create inflationary pressures if global supply chains face disruption. The next MPC meeting was scheduled for February 4–6, 2026.
Key facts
- The MPC unanimously voted to cut the repo rate by 25 bps to 5.25% on December 5.
- This was the third consecutive cut in 2025 reducing rates from 6.50% to 5.25%.
- CPI inflation forecast for FY26 was revised downward by 60 bps to a record low of 2.0%.
- GDP growth projection for FY26 was upgraded from 6.8% to 7.3%.
- RBI Governor Sanjay Malhotra succeeded Shaktikanta Das in December 2024.
- Critics cautioned that ultra-low 2% CPI inflation may be temporary.
PYQPrelims/PYQ angle
- RAS 2023 Inflation targeting framework of RBI — This article shows the same inflation-targeting framework in action as the MPC cut the repo rate citing CPI at 2.0 per cent.
Mains angle
Q: Evaluate the December 2025 RBI Monetary Policy Committee decision to cut the repo rate and its implications for India's growth-inflation balance.
Answer (50 words):
On 5 December 2025 the MPC unanimously cut the repo rate 25 basis points to 5.25 per cent, the third successive reduction from 6.50 per cent. SDF became 5.00 per cent, MSF 5.50 per cent. Governor Sanjay Malhotra, citing CPI 2.0 per cent, upgraded FY26 GDP growth to 7.3 per cent.
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By how many basis points did the RBI MPC cut the repo rate in its December 2025 meeting?
The RBI MPC unanimously voted to cut the repo rate by 25 basis points to 5.25% in its December 3-5, 2025 meeting.
Source: ICRA / SCC Online / DD News / Bajaj Finserv / HDFC Mutual Fund / Outlook Money / Axis MF
Frequently asked questions
What rate did the RBI MPC cut the repo rate to on December 5, 2025, and by how many basis points?
The RBI Monetary Policy Committee unanimously voted to cut the policy repo rate by 25 basis points to 5.25%, effective December 5, 2025. The Standing Deposit Facility (SDF) rate was correspondingly adjusted to 5.00% and the Marginal Standing Facility (MSF) rate to 5.50%.
Why was the December 2025 rate cut described as India's most aggressive easing since 2019?
The December 5, 2025 cut was the fourth reduction in 2025, after pauses in the previous two policy meetings, bringing the repo rate from 6.50% in February 2025 down to 5.25% — a total reduction of 125 basis points within the year. This pace and magnitude of monetary easing had not been seen in India since the rate cycle of 2019.
What was the RBI's revised CPI inflation forecast for FY26 and what does it signify?
The MPC revised the CPI inflation forecast for FY26 downward by 60 basis points to a record low of 2.0%. This historically low inflation projection provided the primary justification for the rate cut and indicated that price stability goals had been more than achieved.
What was the GDP growth projection upgrade announced alongside the December 2025 rate cut?
Alongside the rate cut, the MPC upgraded India's GDP growth projection for FY26 from 6.8% to 7.3%. This upward revision reflected improved economic momentum and was consistent with the expansionary intent of the rate reduction.
Who is the current RBI Governor and when did he take charge?
Sanjay Malhotra is the current RBI Governor, having succeeded Shaktikanta Das in December 2024. The MPC under his leadership has pursued an accommodative easing cycle, delivering three consecutive repo rate cuts in 2025 to support economic growth.
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