RBI's repo rate cut was expected, says P Chidambaram; hopes it helps

The RBI cut its policy repo rate by 25 basis points to 5.25%. Former Finance Minister P Chidambaram termed the move 'expected' due to low inflation and hoped it would benefit borrowers with EMI loans and marginally help investors.

Chidambaram Calls Rate Cut 'Expected'

After the Reserve Bank of India announced a 25 basis points reduction in the policy repo rate, Congress MP and former Union Finance Minister P Chidambaram on Friday said that this move was expected because of decreased inflation and sufficient liquidity. He further hoped that this move would benefit borrowers, especially those with EMI-based loans, and marginally help investors.

Speaking to ANI, P Chidambaram said, "This was expected because according to RBI and government data, the inflation has come down. Wholesale Inflation has also come down, and there is enough liquidity. Therefore, this was expected that the RBI cut the policy rate by 25 basis points. It should help those who borrow on EMI basis and it should also help only marginally, the investors. So, we will have to wait and see whether this is sufficient or more has to be done. Apart from the policy rate, there are several other things that the government should do and the RBI should do. I hope, after reducing the policy rate, they attend to the other things."

RBI Reduces Repo Rate to 5.25%

The Reserve Bank of India on Friday announced a 25 basis points reduction in the policy repo rate, bringing it down to 5.25 per cent. The decision was communicated by RBI Governor Sanjay Malhotra after the conclusion of the three-day Monetary Policy Committee (MPC) meeting held from December 3 to 5. The governor stated that the MPC undertook a detailed assessment of evolving macroeconomic conditions and future outlook before arriving at the unanimous decision to implement the rate cut with immediate effect.

MPC's Unanimous Decision

Announcing the decision, the Governor said, "The MPC met on the 3rd, 4th, and 5th of December to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 5.25 per cent, with immediate effect." With the announcement today, the latest MPC meeting stands concluded.

Economic Context for the Rate Cut

The rate cut follows a phase of strong macroeconomic performance supported by robust GDP growth of 8.2 per cent in the second quarter of the current financial year and low levels of inflation. India's retail inflation fell sharply to 0.25 per cent in October 2025, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI), marking a record low.

This marks a shift from the last monetary policy announcement on October 1, when the RBI maintained the repo rate at 5.5 per cent. In that review as well, the MPC had unanimously decided to keep the policy rate unchanged after meeting on September 29 and 30 and October 1 to assess domestic and global economic conditions. At that time, the Governor had informed that the committee voted in favour of maintaining the rate at 5.5 per cent.

The latest reduction is expected to provide liquidity support and reinforce momentum at a time when GDP numbers remain strong and inflation continues its downward trajectory. (ANI)

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