Perspective on RBI MPC Announcement by Narender Singh, Investment Manager on smallcase and Founder at Growth Investing
Below the Perspective on RBI MPC Announcement by Narender Singh, Investment Manager on smallcase and Founder at Growth Investing
RBI Monetary Policy Highlights– October 1, 2025
The Reserve Bank of India’s Monetary Policy Committee (MPC), at its meeting on October 1, 2025, decided to keep the policy repo rate unchanged at 5.50%. The stance of monetary policy remains Neutral. This marks the second consecutive pause following cumulative rate reductions of 100 basis points earlier in the year.
Policy Rates
* Repo Rate: 5.50%
* Standing Deposit Facility (SDF): 5.25%
* Marginal Standing Facility (MSF) and Bank Rate: 5.75%
* Cash Reserve Ratio (CRR): 3%
Net foreign direct investment (FDI) inflows reached a 38-month high in July 2025, supported by higher cross-border investments.
Growth and Inflation Outlook
The MPC revised its macroeconomic projections as follows:
* GDP Growth: The forecast for FY26 has been revised upward to 6.8% (from 6.5% earlier), supported by resilient domestic demand and improving investment activity.
* Inflation: The CPI inflation projection for FY26 has been lowered to 2.6% (from 3.1%), reflecting the impact of GST rate rationalization.
GDP Growth Projections
|
Period |
Revised |
Previous |
|
FY26 |
6.8% |
6.5% |
|
Q2FY26 |
7.0% |
6.7% |
|
Q3FY26 |
6.4% |
6.6% |
|
Q4FY26 |
6.2% |
6.3% |
|
Q1FY27 |
6.4% |
6.6% |
CPI Inflation Projections
|
Period |
Revised |
Previous |
|
FY26 |
2.6% |
3.1% |
|
Q2FY26 |
1.8% |
2.1% |
|
Q3FY26 |
1.8% |
3.1% |
|
Q4FY26 |
4.0% |
4.4% |
|
Q1FY27 |
4.5% |
4.9% |
Additional Policy Measures
* External Environment: Governor Sanjay Malhotra highlighted that global headwinds, particularly US tariff actions, continue to pose risks to India’s external sector. He added that the recent GST rationalization could mitigate these risks by stimulating consumption.
* Liquidity Conditions: System liquidity remains in surplus. The RBI will continue to manage liquidity through Variable Rate Repo (VRR) and Variable Rate Reverse Repo (VRRR) operations.
* Consumer Initiatives:
* Standardization of claim settlement processes for deceased bank customers.
* Expansion of the Retail-Direct platform to allow retail investors to participate in treasury bills through systematic investment plans (SIPs).
The RBI’s latest policy reflects a balanced approach—maintaining rate stability while acknowledging both domestic resilience and external risks. By revising growth projections upward and inflation forecasts downward, the MPC signaled cautious optimism for FY26.
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