The Reserve Bank of India (RBI) announced its latest Monetary Policy Committee (MPC) decision on October 1, 2025, led by RBI Governor Sanjay Malhotra. The central bank decided to keep the repo rate unchanged at 5.50%, while giving positive signals on inflation and economic growth.
This move was widely expected by analysts, as the RBI has already cut rates earlier in 2025 and is now waiting to see the full impact of those changes. The October RBI policy is being seen as a “dovish pause”, where the central bank prepares the ground for possible rate cuts in the coming months.
Key Highlights of RBI Monetary Policy October 2025
1. Repo rate unchanged at 5.50%
The RBI has decided not to change the repo rate, the rate at which it lends money to commercial banks.
The reverse repo rate and other key policy rates also remain the same.This means there will be no immediate change in EMIs for borrowers.
2. Inflation forecast revised down to 2.6%
The RBI now expects Consumer Price Index (CPI) inflation to average 2.6% in FY26, lower than the earlier forecast of 3.1%.
The downward revision reflects falling food prices, stable crude oil, and a good monsoon season.
3. GDP growth forecast raised to 6.8%
India’s GDP growth projection for FY26 has been upgraded to 6.8% from 6.5% earlier.
The RBI said strong domestic demand, improved rural income, and robust services sector growth are supporting the economy.
4. Liquidity management framework
The RBI will continue to use the Weighted Average Call Rate (WACR) as the main operating target.
Liquidity operations will now be conducted mainly through 7-day variable repo operations instead of 14-day.
5. Banking & credit measures
Lending against shares and IPO financing limits increased to encourage retail participation.Indian banks allowed to finance corporate acquisitions.
Norms for lending against listed debt securities eased.Risk weights for NBFC infrastructure lending reduced to encourage long-term investment.
6. UPI & digital payments
The RBI Governor clarified that UPI transactions will remain free.A new Payment Regulatory Board will be set up to strengthen India’s digital payments ecosystem.
7. Internationalization of the rupee
RBI proposed steps to promote the rupee in global trade.Indian banks may now lend in rupees to neighboring countries like Nepal, Bhutan, and Sri Lanka.
Vostro account rupee balances of foreign entities can now be invested in corporate bonds, not just government securities.
Why Did RBI Keep Repo Rate Unchanged?
Even though inflation has fallen below the midpoint of the RBI’s target range (2%–6%), the central bank is cautious.
Key reasons include:The effect of earlier rate cuts (100 bps in 2025) is still working through the system.Global uncertainties, including US tariffs on Indian exports, could slow growth.
Volatility in global oil and commodity markets could trigger inflation again.The RBI wants to observe the festive season demand before deciding on fresh rate cuts.
This indicates that the RBI is in “wait and watch mode” while keeping the door open for easing in December or early 2026.
Impact on Borrowers and Investors
Home loan and personal loan borrowers: No immediate cut in EMIs, but if inflation remains low, banks may reduce lending rates later.
Equity markets: Positive sentiment as RBI raised GDP forecast and announced measures to ease credit. Banking and infra stocks gained.
Bond markets: Yields may soften as inflation is low and markets expect a future rate cut.
Consumers: Lower inflation means more purchasing power, which can boost demand for cars, homes, and electronics.
RBI Governor Sanjay Malhotra’s Statement
RBI Governor Sanjay Malhotra emphasized that India’s economy is on a strong footing. He highlighted three key priorities:
1. Price stability: Keep inflation under control.
2. Financial stability: Ensure liquidity and smooth transmission of monetary policy.
3. Growth support: Encourage credit flow to businesses and households.
He also dismissed rumors of UPI charges, calling them “unfounded” and reaffirmed RBI’s commitment to free digital payments.
The RBI Monetary Policy October 2025 has sent a clear signal: the Indian economy is growing stronger, inflation is under control, and monetary policy will remain supportive. By keeping the repo rate at 5.50%, while cutting inflation forecasts and raising growth projections, the RBI has struck a careful balance.
For businesses, this policy means easier access to credit and a push toward international trade in rupees.
For consumers, it means stability in EMIs and relief from high prices. For investors, it provides optimism about India’s growth story.If inflation stays low and growth momentum holds, the December 2025 RBI monetary policy may bring a much-awaited rate cut—giving further relief to borrowers and boosting India’s economic prospects.