The Reserve Bank of India (RBI), in its December 2025 monetary policy review, reduced the policy repo rate by 25 basis points to 5.25% and maintained a neutral policy stance. The decision was driven by strong economic growth and exceptionally low inflation, which Governor Sanjay Malhotra described as a “rare Goldilocks period”
Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank shared his comment on RBI monetary policy, “Highlight of today’s policy is the emphatic liquidity support, especially durable liquidity, by the RBI. The central bank has delivered decisively on this front announcing OMO purchases of INR 1 trillion and 3-year USD/INR buy-sell swaps of USD 5 billion, injecting durable liquidity worth INR 1.45 trillion during December. One feels the RBI may continue with such liquidity supportive measures during Q4. This will likely materially aid transmission to bond yields and lead to further softening in bank lending rates. With inflation expected to average around 3% over the next about 12 months, current real rate would still be significantly higher than the RBI’s perceived neutral real rate of 1.4-1.9%, which implies that the ongoing rate easing cycle may not be over yet.”
