RBI Policy Meeting 2025 Live: Repo Rate at 5.5%, GDP Growth Revised to 6.8%, Inflation at 2.6%

The Reserve Bank of India (RBI) on October 1, 2025, announced its fourth bi-monthly monetary policy of the current fiscal. The Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, decided to keep the policy repo rate unchanged at 5.5%, maintaining a “neutral” stance.

While the RBI flagged tariff risks that could weigh on growth in the second half of the year, it also revised India’s GDP growth forecast for FY26 upward to 6.8%. At the same time, the central bank lowered its retail inflation forecast to 2.6% for FY26, citing the impact of GST 2.0 rate cuts and stable food prices.

Key Highlights of RBI Monetary Policy Meeting 2025

• Repo rate unchanged at 5.5%

• GDP growth forecast revised up to 6.8% for FY26

• Inflation projection cut to 2.6% for FY26

• Neutral policy stance maintained

• Forex reserves at USD 700.2 billion (covering 11 months of imports)

• CRR cut to improve banking liquidity

• Stronger remittances expected to support current account stability

• Reforms for banks: ECL provisioning from 2027, eased Basel III norms, new ombudsman coverage

Why Did the RBI Hold Rates at 5.5%?

The MPC decision was unanimous. Having already delivered 100 basis points of rate cuts this year (25 bps in February, 25 bps in April, and 50 bps in June), the RBI chose to pause and assess the impact.

Economists say the central bank preferred a “measured approach” in light of:

• Falling inflation (August CPI hit a six-year low of 2.07%)

• Global macroeconomic volatility (US tariffs, geopolitical tensions)

• GST 2.0 tax rate cuts, which are easing consumer prices

• Upcoming festive season, where stability is key to boosting demand

RBI Governor’s Statement

Governor Sanjay Malhotra highlighted that while India’s economy remains on a strong recovery path, tariff uncertainties could slow expansion in the second half of FY26.

He noted:

• “GST rate rationalisation will aid consumption, but tariff-related developments may weigh on growth momentum.”

• The RBI remains committed to keeping CPI inflation near its 4% target, with flexibility of ±2%.

Inflation Outlook: Softer Than Expected

Thanks to GST cuts and easing food prices, RBI now projects:

• CPI Inflation for FY26: 2.6%

  • Q2 FY26: 1.8%

  • Q3 FY26: 1.8%

  • Q4 FY26: 4.0%

  • Q1 FY27: 4.5%

This marks a significant downward revision from the August projection. With inflation below 4% since February 2025, the RBI has more room to support growth if risks intensify.

Growth Outlook: GDP Revised to 6.8%

India’s GDP growth for FY26 has been revised up to 6.8% from earlier estimates. Factors supporting growth include:

• Strong consumer demand during the festive season

• Stable inflation boosting purchasing power

• Improving credit flow due to earlier rate cuts

• Robust remittance inflows, aiding domestic consumption

However, tariff disputes and global trade uncertainties remain key risks.

Big Banking Reforms Announced

The RBI also unveiled structural reforms to strengthen the financial system:

1. ECL Provisioning: Extended to most banks and AIFIs from April 2027, with a glide path till 2031.

2. Basel III Norms: Revised to lower capital requirements for MSMEs and home loans, effective April 2027.

3. Operational Risk Norms: Finalised, while market risk norms remain under review.

4. Deposit Insurance Premiums: Will shift to a risk-based model, rewarding well-managed banks.

5. Urban Cooperative Banks: RBI to publish a discussion paper on granting fresh licenses for UCBs.

These moves are aimed at aligning India’s banking sector with global standards, while promoting local growth priorities.

Consumer Impact: What This Means for You

• Home loans & EMIs: Repo rate pause means no immediate changes in EMIs. However, past 100 bps rate cuts have already reduced fresh loan rates by around 58 bps.

• Real estate market: Stable rates and GST cuts are expected to boost housing demand.

• Stock market impact: PSU bank stocks showed mild corrections during the announcement, but reforms are expected to support long-term valuations.

• Investors & exporters: RBI eased rules for IPO financing (limit raised to ₹25 lakh) and extended time for exporters to repatriate foreign currency.

RBI’s Push for Rupee Internationalisation

In a major step, the RBI proposed:

• Allowing banks to lend in Indian rupees to non-residents in Nepal, Bhutan, and Sri Lanka.

• Creating a transparent reference rate for India’s major trading partner currencies.

• Expanding the use of Special Rupee Vostro Accounts (SRVAs) for investments in corporate bonds and commercial papers.

This could significantly boost the rupee’s role in regional trade, reducing dependence on the US dollar.

Expert View

According to Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa at CBRE:

“The RBI MPC’s decision reflects a measured approach amid volatile global conditions. Coupled with GST cuts and low inflation, this is expected to boost consumer confidence and demand across key sectors, especially real estate.”

RBI Monetary Policy Live Updates: Quick FAQs

Q1. What is the current repo rate?
Repo rate remains unchanged at 5.5%.

Q2. Why did RBI not cut rates?
Because inflation is already under control and previous cuts are still working through the system.

Q3. What is India’s GDP growth forecast for FY26?
The RBI now projects 6.8% GDP growth.

Q4. What is the latest inflation forecast?
FY26 inflation is pegged at 2.6%, with risks evenly balanced.

Q5. Will loans get cheaper?
Not immediately, but fresh loans are already cheaper by nearly 58 bps due to earlier rate cuts.

Conclusion

The RBI Monetary Policy Meeting 2025 strikes a balance between growth support and inflation control. With repo rate steady at 5.5%, inflation falling to record lows, and GDP forecast revised upwards, the outlook for India’s economy remains resilient but cautious.

While global tariff risks and trade tensions loom, the RBI’s reforms, banking measures, and push for rupee internationalisation reinforce long-term stability. For consumers and businesses alike, the message is clear: steady growth, controlled inflation, and a stronger financial system ahead.

📌 People Also Ask (FAQ)

Q1. What is the current RBI repo rate after the October 2025 policy meeting?
The repo rate remains unchanged at 5.5%, as the RBI decided to maintain a neutral stance.

Q2. What is India’s GDP growth forecast for FY26?
The RBI has revised India’s GDP growth forecast upward to 6.8% for FY26.

Q3. What is the latest RBI inflation forecast?
Retail inflation (CPI) for FY26 has been projected at 2.6%, with Q2 and Q3 at 1.8% each, Q4 at 4.0%, and Q1 FY27 at 4.5%.

Q4. Why did RBI not cut interest rates further?
The RBI has already reduced rates by 100 basis points in 2025. With inflation trending below 4%, it preferred to pause and monitor the impact.

Q5. How will this RBI policy decision impact home loans and EMIs?
Since the repo rate is unchanged, EMIs remain stable. However, earlier cuts have already brought down fresh loan rates by nearly 58 basis points.