The Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, delivered its much-awaited October 2025 Monetary Policy update following the latest three-day MPC meeting. At the heart of this policy review was a clear message: Stability and Structural Strength.
With global uncertainties—especially aggressive US tariffs and forex volatility—looming large, the central bank struck a balanced tone, choosing to stay the course rather than make any big moves.
Unchanged Interest Rate: A Second Straight Pause by RBI
In a unanimous decision, the Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.50%, a move analyzed in RBI MPC: Repo Rate Steady at 5.50%, marking the second consecutive pause this year .
Here’s a quick snapshot of key rates:
| Key Rate | Current Rate | Status |
| Repo Rate | 5.50% | Unchanged |
| Standing Deposit Facility | 5.25% | Unchanged |
| Marginal Standing Facility | 5.75% | Unchanged |
| Bank Rate | 5.75% | Unchanged |
The RBI had already delivered a 100 bps rate cut earlier this year (from 6.50% to 5.50%) as detailed in RBI Cuts Repo Rate to 5.5%, and is now watching how those cuts and recent government reforms flow through the economy.
The policy stance was also retained as ‘Neutral’, giving the RBI the flexibility to either hike or cut rates in the future, depending on how macroeconomic conditions unfold. While two members advocated for a more accommodative stance, the majority voted for a cautious approach, keeping doors open.
Inflation Forecast Slashed: Why Such a Sharp Drop?
One of the most headline-grabbing announcements was the sharp downward revision in inflation estimates, which you can explore using the Calculate Inflation in India tool to understand its broader impact. The RBI cut its FY26 Consumer Price Index (CPI) inflation forecast to 2.6%, down from its earlier projection of 3.1%.
Here’s how the quarterly projections look now:
| Quarter | Inflation Projection | Previous Estimate |
| Q2 FY26 | 1.8% | 2.1% |
| Q3 FY26 | 1.8% | 3.1% |
| Q4 FY26 | 4.0% | 4.4% |
This significant fall gives RBI room to cut rates in the future, should economic growth require additional support.
Growth Outlook Upgraded: Economy Shows Resilience
On the growth front, the RBI sounded an upbeat note. The central bank revised India’s FY26 Real GDP forecast to 6.8%, up from 6.5%, citing strong domestic fundamentals.
Quarterly GDP forecasts were also updated:
| Quarter | GDP Projection | Previous Estimate |
| Q2 FY26 | 7.0% | 6.7% |
| Q3 FY26 | 6.4% | 6.6% |
| Q4 FY26 | 6.2% | 6.3% |
While domestic signals are strong, external risks remain elevated. Governor Malhotra flagged US tariffs (up to 50%) on Indian exports as a major risk, which could hurt export growth in H2 FY26.
Even though GST rate cuts are helping moderate inflation, they may not fully offset the potential demand slowdown from global trade tensions.
In addition to rate decisions, RBI rolled out a package of 22 regulatory steps to strengthen the financial system. Key reforms include:
| Parameter | Policy Outcome | Investor Implication |
| Repo Rate | Unchanged at 5.50% | Stability in borrowing costs |
| GDP Forecast | Raised to 6.8% | Strong earnings outlook |
| Inflation Forecast | Cut to 2.6% | Confidence; more room for future rate cuts |
| Capital Market Norms | Lending limits raised | Bullish for banks, NBFCs, and financial services |
| Global Headwinds | US tariffs flagged | Caution for export-dependent firms |
The October 2025 policy paints a picture of prudent stability and structural strength. With inflation easing, growth momentum building, and reforms progressing, India appears to be in a “Goldilocks zone”—high growth, low inflation.
Yet, the RBI remains watchful of global risks and has kept the door open for further action if needed. For traders and investors, the message is clear: stay optimistic, but stay informed by reviewing the Impact of Global Economic Trends on Indian Stocks in 2025 to understand how external factors influence market performance.”
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Stock prices can be volatile; investors may lose capital.
https://www.jainam.in/wp-content/uploads/2024/11/Disclosure-and-Disclaimer_Research-Analyst.pdf
The RBI decided to keep the repo rate unchanged at 5.50% for the second consecutive time. This pause allows the central bank to assess how previous rate cuts and government reforms are impacting the economy. With inflation easing and growth holding up, there was no immediate need for further rate action.
Three main factors drove the lower inflation projection:
(1) GST rate cuts, which made goods cheaper
(2) Benign food inflation due to good monsoon and foodgrain supply
(3) A favourable base effect, with August inflation falling to a six-year low of 2.07%
Yes, the RBI’s ‘Neutral’ stance keeps the door open for rate changes in either direction. Given the significant drop in inflation, there is room for a rate cut in the future if growth needs further support.
The upgraded GDP forecast signals stronger economic momentum backed by consumption, good agriculture performance, GST reforms, and a healthy banking system. This could lead to better corporate earnings and stock market performance in FY26.
The 22 structural reforms, especially increased lending limits for shares and IPOs, easier infrastructure financing, and support for NBFCs, will boost credit availability. This is positive for banks, capital markets, real estate, auto sectors, and infrastructure development—all of which create new opportunities for investors.
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