The Monetary Policy Committee (MPC) of the Reserve Bank of India has reduced the repo rate by 25 basis points.
Governor Sanjay Malhotra announced that the rate has now fallen from 5.5% to 5.25%.
This cut means loans will become cheaper.
As a result, EMIs on home, car, and personal loans are expected to decrease, giving relief to borrowers.
In the previous MPC meeting held on October 1, the repo rate was left unchanged at 5.5%.
Indian Economy Moves Into ‘Goldilocks’ Zone
While reviewing the economic conditions of the past two months, Governor Malhotra said that inflation has stayed moderate since October 2025.
Strong growth combined with low inflation suggests the economy is entering a rare Goldilocks phase.
What does Goldilocks mean?
In economics, this term refers to a situation where growth is steady and inflation remains under control.
The idea comes from the story “Goldilocks and the Three Bears,” where Goldilocks chooses the porridge that is neither too hot nor too cold.
Similarly, India is currently experiencing balanced growth—fast enough to avoid recession but not so rapid that inflation rises sharply.
This balance is ideal for stable economic progress.
How Much Has the Repo Rate Fallen This Year?
Between February and June, the RBI cut the repo rate by a total of 100 basis points, bringing it down from 6.5% to 5.5%.
In the August and October meetings, no changes were made.
With the latest 25 bps cut, the rate now stands at 5.25%.
What Exactly Is the Repo Rate?
The repo rate is the rate at which the Reserve Bank lends money to commercial banks. When this rate increases, borrowing becomes costlier for banks.
They, in turn, pass on the cost to customers, making personal, home, and vehicle loans more expensive.
When inflation rises, the RBI may increase the repo rate to slow down borrowing and reduce demand.
When inflation is stable, as it is now, the RBI cuts the rate to support growth and make borrowing more affordable.
