RBI MPC August 2025 repo rate decision overview
On August 6, 2025, the Reserve Bank of India’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, met and decided to keep key policy rates the same. This careful but sure stance shows that they are taking a balanced approach to dealing with a complicated global situation that includes rising trade tensions and changing patterns in the domestic economy.
Consistent monetary policy to promote growth and stability
The MPC decided to keep the policy repo rate at 5.50 percent, which is in line with its neutral monetary policy position from earlier this year. Since February 2025, the repo rate has been cut by 100 basis points to try to encourage growth during a time of global uncertainty.
Governor Malhotra said that the RBI has decided to keep rates where they are right now so that the economy has time to fully recover from the last rate cut. He said that India’s banking system is strong because it has a lot of capital, liquidity, and profits. According to the official numbers, commercial banks have a capital-to-risk-weighted-assets ratio (CRAR) of 17%, a liquidity ratio of 132%, and a credit-deposit ratio of about 79%.
The MPC meeting confirmed one important policy decision: the Cash Reserve Ratio (CRR) should start to go down in September 2025. As was said in June, the CRR would be lowered from 4% to 3% of net demand and time liabilities (NDTL) starting on September 6 in four steps of 25 basis points each. The goal is to add enough money to the banking system so that people and businesses can get loans without putting the stability of the money supply at risk.
The macroeconomic outlook is that inflation went down but growth stayed the same
The MPC kept India’s GDP growth forecast for the fiscal year 2025–2026 at a steady 6.5 percent, even though there is still unrest around the world. People are confident because there is a lot of demand at home, the monsoon weather is good for farming, and the government and RBI are working hard to keep the economy moving forward.
The committee’s most important job was to lower its estimate of the CPI inflation rate for FY26 from 3.7 percent in June 2025 to 3.1 percent. Inflation fell to its lowest level in 77 months in June, when it was 2.1 percent. The quarterly inflation forecast says that inflation will be low in the short term and easy to handle in the medium term. It thinks that rates will be 2.1 percent in the second quarter of FY26 and slowly rise to 4.9 percent by the first quarter of FY27.
Governor Malhotra said that lowering inflation gives the RBI more room to change rates in the future if the economy needs it. He said that it is very important to keep an eye out for upside risks like core inflation, rising wages, and monsoon rains that come out of nowhere.
India needs a steady hand to help it get through times of uncertainty.
One of the biggest problems from the outside is the US tariffs on Indian goods. Some Indian goods will be taxed at 25% by the US on August 7, 2025. They also said that the tax might go up in the future. Governor Malhotra said that because of these events, it is now impossible to accurately predict how the tariffs will affect India’s GDP growth.
He did say, though, that India’s economy should be able to handle shocks from outside the country without too many problems. This is because it has a strong banking system, an efficient policy framework, and enough foreign exchange reserves to cover more than 11 months’ worth of imports. He said that the RBI was careful but on the lookout, and that it was ready to change its monetary policy if it got new information.
Experts say that US tariffs could lower India’s GDP growth by 20 to 30 basis points. But India’s strong domestic demand and growing economy act as a buffer, which helps the economy grow as a whole. The RBI has decided to “wait and see,” putting data-driven decisions first and keeping a close eye on how trade around the world is changing.
Signs of recovery in bank credit and liquidity
The amount of credit that banks gave out grew quickly, by 12.1% for the fiscal year 2024–2025. However, it was slower than the 16.3% growth in 2023–2024. The MPC believes that liquidity measures, such as the upcoming CRR cuts and previous interest rate cuts, will help credit flow even more. This will help the real economy by getting people to invest and spend more.
Governor Malhotra said that the changes to the policy are meant to strike a balance between promoting economic growth and easing fears about rising prices. The reserve bank’s choices show that it has faith in India’s strong regulatory framework and sound macroeconomic principles, even though the economy and politics are not clear.
The RBI’s goals with Governor Sanjay Malhotra
In December 2024, Sanjay Malhotra became the 26th governor of the RBI. He had a lot of experience making rules and managing money well. His government is still dedicated to keeping the economy stable and balancing fiscal and monetary policy to promote long-term growth.
His public responses to criticism of India’s economy in the past few years have made people more hopeful about the country’s predicted 18 percent contribution to global GDP growth, which is higher than the US’s 11 percent. Malhotra’s view is realistic about the risks of the present and optimistic about India’s ability to make the most of changes in the global economy.
India needs a steady hand to help it get through times of uncertainty.
The August 2025 MPC meeting shows that the RBI is careful but sure of itself under Sanjay Malhotra’s leadership. Keeping the repo rate at 5.5 percent and starting small liquidity injections by lowering the CRR are part of a planned policy to keep the macroeconomic environment stable.
India has a strong banking system, careful fiscal policies, and steady domestic demand. These things give the country a strong base for continued economic growth, even when there are threats from outside the country, like US tariffs and trade tensions around the world. India’s trend of steady growth is even stronger now that inflation is at its lowest level in years.
As the holidays and the second half of FY26 get closer, the RBI’s careful oversight and flexible policy framework are meant to keep the economy on track while balancing the goals of growth and inflation control in an unpredictable international setting.
