The RBI announced a strategic package of monetary and liquidity-measures aimed at bolstering India’s economic growth and stabilising bond markets. The central bank cut its key policy rate, the repo rate, by 25 basis points to 5.25 %, and maintained a “neutral” monetary policy stance.

Key Highlights

• RBI cuts repo rate and injects major liquidity to support growth amid easing inflation pressures.
• Central bank announces OMOs and a USD-rupee swap to stabilise markets and strengthen transmission.

In conjunction with the rate cut, the RBI set out to inject as much as ₹1 trillion (approx USD 11.1 billion) into the banking system through open market operations (OMOs) scheduled for December 11 and December 18, and facilitate a USD 5 billion three-year dollar-rupee swap on December 16, as part of efforts to ease liquidity pressures and ensure smoother interest-rate transmission.

The decision comes amid a backdrop of cooling inflation and resilient growth in the Indian economy. Retail inflation has fallen to historically low levels, providing the RBI room to support expansion without stoking price pressures. With this in mind, the RBI also revised its growth forecast upward to 7.3 % for the current fiscal year, while bringing the inflation outlook down significantly, signalling increased confidence in the economy’s “Goldilocks” window of moderate inflation and robust growth.

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The RBI’s move also signals its awareness of external risks—such as currency volatility and bond-yield pressures—and an intent to act pre-emptively to maintain financial-market stability. Yet by retaining a neutral stance, the central bank made clear that while further easing is possible, it will be cautious and data-driven.

In summary, the RBI is leveraging a mix of policy-rate easing and targeted liquidity operations to support economic momentum, improve transmission of monetary policy, and navigate both domestic and international headwinds.