The Reserve Bank of India has delivered a policy packed with major moves — from a 25 basis point rate cut to a massive Rs 1 lak-crore liquidity injection. With inflation at record lows and growth staying strong, the central bank used its December MPC meeting to give the economy an extra dose of support. Here are the key highlights, explained simply.
--The RBI has reduced the repo rate — the rate at which it lends to banks — by 25 basis points. This is its fifth cut this year, taking the total reduction to 125 basis points (or 1.25%) since February.
--The policy stance remains ‘neutral’, meaning the RBI has kept the door open for future cuts if economic conditions require them.
--To ease pressure on banks and push lending rates lower, the RBI will inject Rs 1 trillion (one lakh-crore) through open market operations (where it buys government bonds).
--Separately, it plans to infuse another $5 billion through forex swaps to ensure the banking system has enough cash and to smoothen rate transmission.
--After India posted a strong 8.2 percent GDP growth in Q2, the RBI has revised its full-year forecast up from 6.8 percent to 7.3 percent.
--Inflation, meanwhile, continues to cool. The central bank now expects inflation at 2 percent, down from 2.6 percent earlier — well below its 4 percent target.
--India’s foreign exchange reserves stand at $686 billion, marginally lower than the previous week.
--The small decline indicates that the RBI has been intervening to prevent excessive volatility as the rupee hit record lows during the policy week.
--India’s current account deficit has improved from 2.2 percent of GDP last year to 1.3 percent in Q2 this year.
--Services exports remain strong, though merchandise exports still face weak global demand. The RBI said external risks remain, but ongoing trade talks may provide upside.
--The MPC said that the sharp drop in inflation has created “policy space” to continue backing growth.
--Both headline and core inflation are expected to hover around 4 percent through the first half of 2026–27. Growth remains strong but may moderate slightly — making continued support essential, the RBI noted.