RBI Cuts Repo Rate by 25 bps to 5.25%, Offering Relief to Borrowers

Mumbai: The Monetary Policy Committee of the Reserve Bank of India (RBI) took a decision this morning, which will have a direct impact on both the pockets of the common people and the speed of the market. RBI reduced the repo rate by 25 basis points to 5.25%. This deduction may seem small, but its impact is huge, especially when the ever-increasing loan EMIs are already troubling many people.

What does this mean for the common people and EMI payers?

This is the question that arises first. The new repo rate means that banks will now be able to give loans at slightly cheaper interest rates. If this benefit reaches the customers from the banks, then the EMI of home loans, car loans, and personal loans can be reduced. Many families have been burdened by rising loan costs for the last two years. In such a situation, this decision of RBI will feel like some relief.

Why did RBI need to take this step?

It was seen for a long time that the pace of the economy was slowing down. Inflation is still within limits, but spending and investment in the market have stopped a bit. People were hesitant in taking big decisions due to the cost of loans. In such an environment, RBI thought that now is the right time to relax the interest rates so that some activity comes back in the market.

VIDEO | Mumbai: In his Monetary Policy Statement RBI Governor Sanjay Malhotra says, “The MPC has unanimously reduced the policy repo rate by 25 basis points to 5.25% with immediate effect. Evolving geopolitical and trade environments continue to weigh on the outlook. While… pic.twitter.com/FyQAVE1IgS

— Press Trust of India (@PTI_News) December 5, 2025

Is RBI now more confident about the economy?

RBI clearly said in its statement that India's economic foundation looks strong. GDP growth estimates have also been slightly improved. Global conditions may be uncertain—US policy is tight, European demand is weak, and China's production capacity is under strain—but domestically, India's market is stable.

Does RBI plan to increase not just interest rates but also liquidity?

RBI also said that it will increase the supply of money in the market if needed. Tools like OMO and Forex swap will be used so that banks have adequate funds. This can increase the speed of loan giving and will provide relief to small and big businesses.

How do experts view this decision?

Economists are calling it a 'careful but necessary step.' Because if there were more cuts, inflation could rise again. But not cutting at all could have slowed the economy further. The middle path—i.e., a cut of 25 basis points—is considered the best option for now.

What to expect next?

RBI has clearly said that it will keep a constant eye on inflation, crude oil prices, and the global environment in the coming months. If circumstances remain favorable, further small steps can be taken.