RBI MPC October 2025: Repo Rate Steady at 5.5%, Inflation Forecast Eases

The Reserve Bank of India (RBI), during its Monetary Policy Committee (MPC) meeting on October 1, 2025, decided to keep the repo rate steady at 5.50%, while maintaining a neutral policy stance. The Standing Deposit Facility (SDF) remains at 5.25%, and the Marginal Standing Facility (MSF)/Bank Rate continues at 5.75%.

The move highlights RBI’s cautious balancing act, holding rates steady amid global trade headwinds and financial market volatility, while inflation has cooled to multi-year lows.

Key Takeaways from the RBI MPC

 Inflation Outlook

• FY26 CPI forecast: 2.6% (down sharply from earlier ~4.5%)
  
  
• Drivers: falling food prices, GST rationalisation, ample food stocks, and a good monsoon
  
  
• Core inflation: Stable, supporting RBI’s pro-growth stance
  
  

 Growth Projections

• Q1 FY26 GDP: 7.8% (stronger-than-expected)
  
  
• FY26 GDP forecast: Raised to 6.8% (from ~6.5%)
  
  
• Quarterly trend:
  
  
  • Q2 FY26 – 7.0%
    
    
  • Q3 FY26 – 6.4%
    
    
  • Q4 FY26 – 6.2%
    
    
  • Q1 FY27 – 6.4%
    
    

 Liquidity & Bond Markets

• Surplus liquidity of ~₹2.1 lakh crore remains supportive of credit growth
  
  
• Softer inflation outlook improves the backdrop for bond yields and debt markets
  
  

Structural Reforms Announced

Alongside its rate decision, the RBI unveiled several long-term reforms:

1. Risk-based deposit insurance premiums for banks
   
   
2. Higher lending ceilings against listed securities – from ₹20 lakh to ₹1 crore
   
   
3. IPO financing limit raised from ₹10 lakh to ₹25 lakh
   
   
4. NBFC infra lending to get lower risk weights
   
   
5. Export facilitation & INR internationalisation:
   
   
   • Easier export transactions
     
     
   • INR lending to neighbouring economies
     
     
   • Wider use of Special Rupee Vostro Accounts (SRVA) balances
     
     

These measures aim to boost credit flow, reduce risk costs, and strengthen the rupee’s global standing.

Market Impact – Positive for Equities, Bonds & Rupee

• Equities: Supportive, given reforms and growth focus
  
  
• Bonds: Softer inflation outlook positive for yields
  
  
• Rupee: INR internationalisation measures add resilience
  
  

Overall, the October MPC outcome underscores stability with a pro-growth tilt. With inflation under control and reforms underway, India remains well-positioned to strike a balance between growth and financial stability in FY26.