The Goldilocks Cut: RBI Slashes Repo Rate to 5.25%
Governor Sanjay Malhotra delivers the festive cheer borrowers were waiting for. With inflation at 2% and growth at 7.3%, the stage is set for cheaper loans.
By Rohan Das
Financial Analyst
25 BPS
Rate Reduction
It’s official: the waiting game is over. In a move that signals confidence in India’s macroeconomic stability, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) unanimously voted to cut the benchmark repo rate by 25 basis points to 5.25% today.
Governor Sanjay Malhotra, addressing the media in Mumbai, described the current economic landscape as a "Goldilocks" scenario—where growth is robust enough to drive development, yet inflation is cool enough to allow for monetary easing.
At a Glance
- Repo Rate: Reduced to 5.25% from 5.50%.
- Growth: FY26 GDP forecast raised to 7.3%.
- Inflation: FY26 projection lowered to 2%.
Why Now?
The decision pivots on two critical data points. First, Q2 GDP growth surged to 8.2%, beating street estimates. Second, retail inflation in October collapsed to a record low of 0.25%. This divergence gave the MPC the rare luxury of supporting growth without fearing an immediate price spiral.
"The decline in inflation has become generalized," Governor Malhotra noted, adding that core inflation remains contained despite global volatility.
What It Means For Your Wallet
If you have a home loan of ₹50 Lakh for 20 years, a 0.25% drop in interest rates could save you approximately ₹850 per month in EMIs. Over the tenure of the loan, that's a saving of over ₹2 Lakhs.
"This move sweetens the value proposition for homebuyers, particularly in the affordable and mid-income segments which are highly sensitive to interest rate fluctuations."
The Road Ahead
While the stance remains "neutral," the market has interpreted this cut as the start of a softening cycle. However, with global geopolitical tensions and the rupee hovering near 90 against the dollar, the RBI remains watchful. For now, though, it's advantage borrower.
