RBI Monetary Policy highlights - from repo rate to a more ‘global’ rupee
RBI Governor Sanjay Malhotra has presented a monetary policy that keeps growth firmly in focus even as 50% US tariffs threaten India's economic activity.
In its 57th Monetary Policy Committee (MPC) meeting (Sept 29 – Oct 1, 2025), the Reserve Bank of India unveiled a balanced, growth-oriented stance while preserving price stability. Below are ten standout takeaways that matter for markets, borrowers and the broader economy:
1. Repo rate held steady at 5.50%: The RBI decided to maintain the policy repo rate at 5.50%, signalling that current conditions warrant continuity rather than further easing or tightening.
2. Neutral stance adopted: The MPC affirmed a “neutral” policy stance, reflecting that monetary policy will be responsive and data-driven, avoiding aggressive shifts unless warranted.
3. Operating target set as WACR (overnight call rate): Under the revised liquidity framework, the overnight weighted average call rate (WACR) becomes the operating target, replacing the earlier reliance on broader benchmarks.
4. Liquidity tools revamped: The RBI will emphasise 7-day repos and reverse repos for short-term liquidity management, stepping away from the 14-day VRRR (variable rate repos).
5. Advance notice for liquidity: In a move to enhance transparency, the RBI commits to giving the market at least one day’s notice before conducting liquidity operations.
6. Credit flow support and cost reduction measures: The central bank announced five targeted actions to ease lending, especially for corporates and infrastructure sectors—aiming to improve access to capital and lower financing costs.
7. Upward revision of GDP growth outlook to 6.8%: With optimism about domestic demand, the RBI revised its real GDP forecast for FY 2025-26 upward to 6.8 %, showing confidence in the growth trajectory.
8. Measures to further internationalise the Indian Rupee: The RBI unveiled policies to promote the rupee’s use in cross-border trade and transactions, aiming to reduce dependence on foreign currency and strengthen currency sovereignty.
9. Regulatory reform agenda launched: In one of its boldest moves, the RBI announced sweeping regulatory changes to streamline banking norms, improve credit access, and bolster financial sector resilience.
10. Policy transmission & faster rate pass-through norms
To ensure that rate changes by the RBI reflect more swiftly in lending rates, the central bank relaxed norms (e.g. for large exposures, gold loans) and flagged reforms to speed transmission.
