The Reserve Bank of India’s Monetary Policy Committee (MPC) has lowered the policy repo rate by 25 basis points, bringing it down to 5.25%, while keeping its stance neutral. This policy easing reflects the central bank’s measured confidence in the current economic landscape, as price pressures remain subdued and growth continues at a comfortable pace. The rate cut follows the October meeting, in which the repo rate was held at 5.50%.
Liquidity Measures Announced to Strengthen Market Conditions
In addition to easing the policy rate, the RBI has introduced a fresh liquidity infusion plan to ensure smooth financial operations and prevent tightness in the money market. Key steps include:
- Open market purchases worth ₹1 lakh crore scheduled for December
- A three-year USD/INR swap of $5 billion
These measures are intended to stabilise market liquidity and support steady credit flow. As soon as the announcement hit the market, government bond yields eased, with the benchmark 10-year yield dropping from 6.51% to 6.47%, reflecting expectations of cheaper borrowing.
Inflation Outlook Remains Comfortable
The RBI noted significant improvement in underlying inflationary trends. Core inflation has cooled in recent months, helped by a fall in commodity and precious metal prices. With these favourable developments, the central bank has brought down its full-year retail inflation forecast to 2%, lower than its previous estimate. This gives the RBI more flexibility to support growth without risking price instability.
Growth Momentum Strengthens Policy Space
India’s economic growth continues to outperform expectations. The July–September GDP growth of 8.2% surprised economists, prompting several revisions in full-year forecasts to above 7%. With the economy operating around its estimated potential of 6.5–7%, the RBI appears confident that modest rate easing will not trigger overheating.
Impact on Borrowers and the Housing Market
The latest rate cut is expected to translate into slightly lower loan rates for households and businesses. However, the RBI emphasised that future rate actions will depend on incoming economic data and global conditions.
Industry Reaction
Mr. Anurag Goel, Director, Goel Ganga Developments, highlighted the possible implications for the real estate sector, especially in cost-sensitive markets:
“A 25-basis-point reduction in the repo rate to 5.25% can meaningfully soften home loan rates—provided lenders transmit the benefit promptly. With revised GDP projections pointing to stronger income prospects and better job confidence, many fence-sitters may finally convert inquiries into purchases. This is particularly encouraging for affordable and mid-income buyers in Tier II and III cities, where small changes in EMI make a big difference. Lower borrowing costs paired with stronger economic optimism could revive sentiment in markets where pricing had begun to stretch. The result would be a healthy cycle of growth driven by genuine end-user demand rather than speculative activity.”
