RBI Monetary Policy: Repo Rate Held at 5.5%, GDP Forecast Boosted to 6.8%

The Reserve Bank of India (RBI) recently concluded its Monetary Policy Committee (MPC) meeting on October 1, 2025, with several key decisions impacting the financial sector. The current governor is Sanjay Malhotra, who took office in December 2024, succeeding Shaktikanta Das.

October 2025 Monetary Policy Highlights

• Repo Rate: The MPC unanimously decided to keep the repo rate unchanged at 5.50% and maintained a "neutral" stance. This was the second consecutive meeting with no change to the rate, following a cumulative 100-basis-point cut earlier in 2025.

• Economic Forecasts for FY2025–26:

  • GDP Growth: The RBI revised its GDP growth forecast upward to 6.8%, from the previous estimate of 6.5%.

  • Inflation: The CPI inflation forecast was lowered to 2.6% from the previous projection of 3.1%.

• Key Commentary:

  • The RBI noted that domestic demand remains resilient, supported by a favorable monsoon and recent GST rationalization.

  • The MPC acknowledged that external risks, including ongoing trade tensions and US tariffs, could weigh on growth in the latter half of the fiscal year.

Banking sector and regulatory reforms

In addition to monetary policy, the RBI announced several structural measures for the banking sector.

• Expanded lending for banks: Banks are now permitted to finance corporate acquisitions.

• Increased lending limits: Limits for loans against shares have been raised from ₹20 lakh to ₹1 crore, and IPO financing limits have been increased from ₹10 lakh to ₹25 lakh per person.

• Regulatory updates:

  • A new Expected Credit Loss (ECL) framework for banks and financial institutions will be implemented starting April 2027.

  • Risk weights for Non-Banking Financial Companies (NBFCs) lending to infrastructure projects will be reduced.

  • The RBI will introduce risk-based deposit insurance premiums.

• Other reforms: The central bank will publish a discussion paper on the licensing of new Urban Cooperative Banks (UCBs).

Other announcements and recent updates

• Internationalization of the rupee: The RBI is taking steps to increase the use of the Indian rupee for cross-border transactions, including allowing banks to lend rupees to non-residents in Bhutan, Nepal, and Sri Lanka.

• No UPI charges: Governor Malhotra clarified that there are no current proposals to levy charges on UPI transactions.

• Forex reserves: As of late September 2025, India's foreign exchange reserves stood at $700.2 billion.

• Upcoming meeting: The next MPC meeting is scheduled for December 3–5, 2025.