Mumbai, December 5, 2025 – Reserve Bank of India (RBI) Governor Sanjay Malhotra announced today that the central bank will conduct Open Market Operations (OMO) of ₹1 lakh crore to inject durable liquidity into the financial system. This decision was made during the Monetary Policy Committee (MPC) meeting, where the committee also decided to reduce the repo rate by 25 basis points to 5.25%.
The OMO, which involves the purchase of government securities, aims to increase liquidity in the market. In addition to the OMO, the RBI will also execute a three-year dollar-rupee buy-sell swap of $5 billion in December. These measures are intended to ensure sufficient liquidity in the banking system and support economic activity.
Governor Malhotra highlighted that India's foreign exchange reserves stand at a "healthy" $686 billion, providing import cover for 11 months. He noted that merchandise exports contracted year-on-year in October 2025, while imports rose for the second consecutive month, leading to a wider trade deficit. However, he expects strong service exports and remittances to keep the current account deficit at a modest level.
The MPC has also revised its real GDP growth projection upwards to 7.3%, a 50 basis point increase from the previous estimate. The updated GDP outlook is as follows: Q3: 7%, Q4: 6.5%, Next year Q1: 6.7%, Next year Q2: 6.8%.
Furthermore, Governor Malhotra stated that CPI inflation for the current year is now projected at 2%, a decrease of 0.6% from the earlier projection. The central bank expects headline and core inflation to stay at or below 4% in the first half of FY27.
The decision to cut the repo rate reflects the MPC's assessment of the current economic situation, characterized by robust growth and declining inflation. The previous repo rate was 5.5%. The Governor described the prevailing economic environment as a "rare Goldilocks phase". The MPC has decided to maintain a neutral policy stance, which allows for flexibility in responding to evolving economic conditions.
Following the policy decision, the Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) has been revised to 5%. Meanwhile, the Marginal Standing Facility (MSF) rate and the bank rate have been increased to 5.5%.
The rupee initially rose to 89.69 against the US dollar but later declined to 89.8450 after the rate cut announcement. The monetary policy review occurs amidst a backdrop of the Indian Rupee hitting a low this week, crossing the $90 mark.
The BSE indices Sensex, Bankex, and Sensex 50 are showing an upward trend, while the Sensex Next 50 is marginally down.
