RBI pauses rate cuts, keeps repo rate at 5.25 per cent

The Reserve Bank of India (RBI) on Friday paused its rate-cut cycle, deciding to keep the policy rate unchanged after reducing it by 25 basis points in December, citing geopolitical uncertainties.

The review marks the first monetary policy announcement since finance minister Nirmala Sitharaman presented the Budget for the financial year 2026-27.

Announcing the sixth and final bi-monthly monetary policy for the current fiscal, RBI governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has decided to retain the short-term lending rate, or repo rate, at 5.25 per cent with a neutral stance.

The decision to pause comes as CPI-based headline retail inflation has remained below the 2 per cent lower band mandated by the government for the past four months.

The central bank has been tasked with ensuring that consumer price index (CPI)-based retail inflation stays at 4 per cent, with a margin of 2 per cent on either side.

Since February 2025, the RBI has reduced the policy rate by 125 basis points. In its previous policy review in December, it trimmed the repo rate by 25 basis points to 5.25 per cent.

Following the MPC’s recommendations, the RBI reduced the repo rate by 25 basis points each in February 2025 and April, and by 50 basis points in June amid easing retail inflation. However, the central bank halted its rate cut in August.

In the last MPC meeting, the RBI again reduced the repo rate by 25 basis points to 5.25 per cent.

India’s retail inflation fell to a historic low of 0.25 per cent in October 2025, the lowest level since the CPI series was introduced. The Indian economy also recorded better-than-expected GDP growth of 8.2 per cent in the second quarter.

According to government estimates, the economy is projected to grow at 7.4 per cent during the ongoing financial year.

However, the rupee declined to a historic low last week, crossing 92 against the dollar, making imports costlier and raising concerns about a potential rise in inflation.

The rupee has depreciated by about 6 per cent in the calendar year 2025.