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:
- Risk-based deposit insurance premiums for banks
- Higher lending ceilings against listed securities – from ₹20 lakh to ₹1 crore
- IPO financing limit raised from ₹10 lakh to ₹25 lakh
- NBFC infra lending to get lower risk weights
- 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.
