RBI monetary policy on Fri; mixed expectations on rate cut, status quo

RBI to Announce Bi-Monthly Monetary Policy Amid Mixed Expectations

The Reserve Bank of India is set to announce its bi-monthly monetary policy on Friday, with mixed expectations of a 25 basis points rate cut and the possibility of the central bank opting for status quo.

Background and Expectations

• Reserve Bank's rate-setting panel, the Monetary Policy Committee (MPC), has started its three-day deliberation on the next set of bi-monthly monetary policy.
• The meeting is taking place against the backdrop of falling inflation, rising GDP growth, the rupee crossing 90 against the dollar, and ongoing geopolitical tensions.
• Several experts believe that while growth remains robust, a significant decline in retail inflation has created additional room for a reduction in the key short-term lending rate.

Experts Weigh In

• Sankar Chakraborti, Managing Director and Chief Executive Officer of Acuité Ratings & Research: "Expectations in the market are finely balanced as economists weigh two contrasting signals from the economy. On one hand, both retail and core inflation have eased to multi-month lows, creating a comfortable backdrop for a potential 25-basis-point rate cut. On the other hand, India’s Q2 FY26 GDP growth remained strong, crossing 8 per cent."
• Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution: "A rate cut at this juncture would provide meaningful relief to borrowers – particularly those servicing big-ticket loans such as home loans and auto loans. It would help lower the overall cost of credit and, in turn, stimulate demand across key consumption-driven and investment-led sectors of the economy."
• Atul Monga, CEO and Co-Founder of BASIC Home Loan: "For homebuyers, this means EMIs may likely rise in the near future, offering stability over the next year. But doesn’t necessarily mean relief, considering many borrowers who took floating-rate loans in the last 18-24 months are still coping with higher repayment commitments."

Consensus and Projections

• A BNP Paribas India report has said that the consensus is building a 25 bps rate cut in the upcoming MPC announcement on December 5, 2025.
• The report added, "Most of the fundamental data points support this prognosis, given low inflation that even on consensus-expected end FY26 rebound, stays well within RBI’s comfort zone."

RBI's GDP Growth Forecast

The RBI is also expected to revise its GDP growth forecast upward, given better-than-expected first-half numbers. Earlier in October, the Reserve Bank of India had upped the GDP forecast to 6.8 per cent from the earlier projection of 6.5 per cent for the current financial year.