RBI MPC Highlights: Rate Cut, Higher GDP Forecast, and ₹1.45 Lakh Crore Liquidity Infusion
RBI's December 2025 MPC meeting delivered a 25 bps repo rate cut to 5.25%, raised FY26 GDP forecast to 7.3%, and announced ₹1.45 lakh crore liquidity infusion via OMOs and forex swaps to fuel growth amid ultra-low inflation. This pro-growth pivot supports credit expansion and investment while retaining a neutral stance for data-dependent flexibility.
MPC Key Decisions
Repo rate reduced by 25 bps to 5.25%, with SDF at 5.00% and MSF/Bank Rate at 5.50%; unanimous vote reflects comfort with inflation below 1% in recent months.
Policy stance held at "neutral" to allow pauses or further easing based on incoming data, marking the third cut in 2025 for cumulative 75 bps relief.
Updated Macro Projections
FY26 real GDP growth upgraded to 7.3% (from 6.8%), driven by strong Q2 prints above 8%, robust capex and private consumption recovery.
CPI inflation slashed to 2.0% for FY26 (down 60 bps), with Q3-Q4 under 1% due to food deflation and benign core pressures, well within the 4%±2% band.
Liquidity Infusion Details
RBI plans ₹1 lakh crore Open Market Operations (G-Sec purchases) plus a $5 billion (≈₹45,000 crore) forex buy-sell swap to inject durable liquidity into banking and money markets.
These measures ease funding pressures, lower bond yields and support transmission of rate cuts to lending rates amid steady deposit growth.
Market and Sector Reactions
Post-announcement, rate-sensitive indices rallied: Nifty Bank +1.2%, Realty +2.5%, Auto +1.8%, reflecting expectations of cheaper loans and capex revival. Broader Nifty gained 1%, with 10-year G-Sec yields dipping 5 bps to support debt markets.
Economic Implications
| Aspect | Impact from MPC Decisions | Key Beneficiaries |
|---|---|---|
| Credit Growth | Positive: Lower rates + liquidity spur loans | Banks, NBFCs, SMEs |
| Investment/Capex | Positive: Cheaper project finance boosts IRRs | Infra, industrials, realty |
| Consumption | Positive: EMI relief aids durables, housing | Autos, consumer finance |
| Bond/Debt Markets | Positive: Yield compression, price rallies | Gilt funds, insurers |
| Forex/Rupee | Neutral-positive: Swaps stabilise without intervention | Exporters, importers |
Governor Malhotra highlighted a "rare goldilocks" setup of high growth and low inflation, urging markets and corporates to leverage the supportive environment for sustained momentum. Risks like global slowdowns or food shocks remain monitored, but buffers from reserves and fiscal discipline provide resilience.
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