RBI Cuts Down Interest Rate by 25 Basis Points

RBI has cut down repo rate by 25 basis points or 0.25% in its monetary policy announcement today, 5^th December, 2025. The repo rate now stands at 5.25%. The repo rate is the rate at which RBI lends to banks. It serves as the benchmark interest rate in India.

RBI to maintain neutral stance

The RBI also said that it will be maintaining a neutral stance. Neutral stance means that the central bank will neither be increasing the money supply in the economy nor will it be decreasing it. It will neither try to stimulate the economy nor try to slow it down.

Nifty, Sensex rise steeply after the announcement

Nifty 50 and Sensex have risen steeply after this announcement. At 10:15 a.m. IST Nifty 50 is up by 41 points or 0.16%. Sensex is up by 138.20 points or 0.16%.

Cutting down of interest rate will give a boost to the economy in that it will reduce the cost of interest sensitive consumption and investment. Interest rates on home loans may go down further. On the other hand, it may cause the rupee to depreciate further against the dollar. This in turn will make India’s imports more expensive. India is heavily reliant on imports for the bulk of its energy needs. More expensive imports will put upward pressure on inflation.

US Federal Reserve likely to go for interest rate cut next week

US Federal Reserve is expected to cut down interest rate by 25 basis points in its monetary policy meeting next week. The RBI is probably hoping that with US Federal Reserve also going for a 25 basis point rate cut, the pressure on rupee because of interest rate differential between the two countries will go down or will remain limited.

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Source: RBI, NSE