RBI MPC meet: What stayed the same, what changed in December policy review

The Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday announced that the Monetary Policy Committee (MPC) cut the repo rate by 25 basis points, bringing it down to 5.25 per cent from 5.5 per cent. December policy meeting's rate cut came after two consecutive pauses in the last meetings.

 

Let's take a look at what are the key rates and forecasts that changed in the December monetary policy decision.

December RBI MPC: What has changed

Repo rate: The most significant change in the December policy meeting was the reduction of the repo rate, the interest rate at which the RBI lends money to commercial banks. The repo rate reduction to 5.25 per cent came amid benign inflation and strong growth.

 

Standing Deposit Facility (SDF): Along with the repo rate, the SDF was adjusted to 5.00 per cent in December from 5.25 per cent in the October policy meeting. Through SDF, commercial banks can park surplus funds with the central bank without collateral.

 

Marginal Standing Facility (MSF): The MSF and bank also consequently came down to 5.50 in December from 5.75 per cent in October. MSF is an overnight borrowing window for banks from the RBI.

 

Growth: The RBI also revised its growth forecast upwards to 7.3 per cent from 6.8 per cent. The decision came as India's gross domestic product (GDP) continues to stay resilient, growing at 8.2 per cent in the September quarter, followed by a 7.8 per cent growth in the June quarter. Here's how the quarterly estimates changed:

• Q3FY26: Raised to 7.0 from 6.4 per cent
• Q4FY26: Raised to 6.5 per cent from 6.2 per cent
• Q1FY27: Raised to 6.7 per cent from 6.4 per cent

Inflation: Noting that the overall inflation is likely to be softer than what was projected in October, mainly on account of the fall in food prices, the RBI MPC lowered the inflation projection. The MPC revised its inflation forecast downward to 2 per cent from 2.6 per cent. Here's how the quarterly estimates changed:

• Q3 FY26: Cut to 0.6 per cent from 1.8 per cent
• Q4 FY26: Raised to 2.9 per cent from 1.8 per cent
• Q1 FY27: Cut to 3.9 per cent from 4.5 per cent

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December policy meeting: What remains the same

After announcing the key changes, the RBI MPC maintained its stance as 'neutral.' The stance was changed from 'accommodative' to 'neutral' in the June policy meeting.

 

The next meeting of the MPC is scheduled from February 4 to 6, 2026.