The Reserve Bank of India just flipped the script on market jitters over a sliding rupee and blockbuster GDP prints, delivering a surprise rate trim that hands consumers cheaper loans and banks a liquidity lifeline. As Mumbai’s trading screens flipped green post-announcement, the central bank’s dovish pivot signals confidence in a steady-growth story even as global winds howl.
In a unanimous call from its Monetary Policy Committee, the RBI repo rate cut by 25 basis points to 5.25% marks the fourth easing this year, blending rate relief with sharper forecasts to back economic momentum. From the policy huddle at Mint Street to broker chats in BKC, where fund managers dissected the move over hurried lunches, the talk is of a “rare Goldilocks” setup—growth firing without inflation flares.
RBI Repo Rate Cut Breakdown: From 5.50% to 5.25% – Why Now?
The MPC, led by Governor Sanjay Malhotra in his first full review since taking over, stuck to a neutral stance but leaned into growth support despite the rupee dipping to fresh lows against the dollar. This 25 bps snip—on the heels of 100 bps cuts since February—comes after Q2’s 8.2% GDP sprint, the strongest in six quarters, fueled by festive spending and GST tweaks.
Malhotra, fielding questions in the post-policy presser, shrugged off currency concerns: “We’re comfortable on the external front—volatility’s normal, but reserves at $686 billion give us buffers.” The decision overrides earlier pause bets, triggered by October’s CPI plunge to 0.25%—a series low—leaving room for pro-growth plays without stoking prices.
Traders I caught up with near Dalal Street nodded: The cut’s timed for transmission, easing EMIs on everything from home loans to car finance, just as year-end demand picks up.
Liquidity Injection: ₹1 Lakh Cr OMO and $5 Bn Forex Swap Details
No lone ranger here—the RBI repo rate cut pairs with heavy artillery on the liquidity front. A ₹1 lakh crore open market operation buy of government securities kicks off this month, flooding banks with durable funds to smooth credit flows. Add a three-year $5 billion USD/INR buy-sell swap, and you’ve got tools to steady the rupee without draining forex coffers.
Malhotra called it a “calibrated response” to system tightness, with reverse repo nudged to 4.75% for finer corridor play. “Primary liquidity needs ₹2 trillion more this fiscal—we’re stepping up,” he added, eyeing smoother pass-throughs to borrowers. Bond desks lit up: 10-year G-Secs eased 5 bps to 6.85%, a tailwind for debt portfolios.
From my rounds in Chennai’s banking hubs, execs see it easing NIM squeezes for lenders, potentially juicing retail credit that’s already humming at 15% YoY.
Revised Forecasts: GDP Up to 7.3%, Inflation Down to 2% for FY26
Numbers tell the upbeat tale. RBI hiked FY26 real GDP growth to 7.3% from 6.8%, with quarterly breakdowns: Q3 at 6.7%, Q4 at 6.8%, Q1 FY27 at 6.9%. Risks? Evenly balanced, per the outlook, buoyed by manufacturing upticks and services exports climbing 8.8%.
Inflation’s the real stunner—FY26 CPI slashed to 2% from 2.6%, with Q3 at 7% (up from 6.4% prior, but still tame), Q4 at 6.5% (from 6.2%). Core prints eased in Q2, anchored by falling metal prices and rural wage steadiness. “Benign visibility ahead lets us pivot to growth,” Malhotra noted, hailing the “Goldilocks” vibe of expansion without overheating.
Quarterly GDP for FY26: Q1 at 6.7%, Q2 at 6.8%. Analysts like HDFC’s Sakshi Gupta peg FY27 at 6.5%, inflation at 4%. Current account? Deficit trimmed to 1.3% of GDP in Q2, thanks to remittances and FDI doubling to $7.7 billion in H1.
Expert Views: VK Vijayakumar on Growth Tilt Despite Rupee Pressures
Geojit’s chief investment strategist VK Vijayakumar, unpacking the call from his Kochi office, called it a “bold vote for expansion.” “MPC went growth despite strong prints and rupee woes—unanimous buy-in shows consensus on worth-the-risk easing,” he told me over a quick line.
Vijayakumar flags the liquidity duo as key: “OMOs and swaps offset FX drags, aiding transmission to real economy.” He eyes one more cut in February if Q3 earnings shine, but warns of Fed cues: “US pause could cap our rally.” Crisil’s economists echo: Measures ensure rate relief hits credit-sensitive spots like NBFCs and realty.
Union AMC’s Parijat Agrawal adds: “Durable infusions lower funding costs, propping overall momentum—space for more if indicators hold.”
Market Pulse: Bonds Dip, Equities Eye Santa Rally Boost
Post-announce, yields softened across the curve, with short-end G-Secs leading the slide. Equities? Nifty Bank popped 0.62% to 59,679, Realty 1.21%—rate plays in full swing. Broader indices closed flat weekly but Friday’s lift hints at December cheer, if US Fed mirrors next week.
Insiders in Ahmedabad’s trading alleys buzz: “RBI’s kitbag—cuts plus cash—keeps the pedal down without oversteer.”
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Market conditions can change rapidly; always consult a certified financial advisor before making decisions. Data sourced from RBI announcements, MPC resolutions, and analyst commentary as of December 5, 2025.
Read Also – RBI Repo Rate Cut Today Sparks Market Rally: Sensex Jumps 447 Points, Nifty Tops 26,100 on Rate Cut Optimism
RBI’s playbook is set for the month—check your loan statements and broker alerts for the ripple. What’s your take on this growth nudge amid rupee slides?
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