RBI Repo Rate Cut: Why Governor Malhotra Slashed Rates to 5.25% Despite 8.2% GDP Growth

The Reserve Bank of India is playing a high-stakes game of “preventative medicine.” On December 5, 2025, the Monetary Policy Committee (MPC) decided to cut the repo rate by 25 basis points, bringing it down to 5.25%.¹

The thing is, on paper, India looks like it’s flying. GDP growth hit a massive 8.2% in Q2.² But the RBI is looking at the dashboard and seeing warning lights for the second half of the year.³ Or nothing. Let’s be real, that “Goldilocks moment”—high growth and ultra-low inflation—isn’t going to last forever. Those too.

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The “Why Now?” Breakdown

Why cut rates when growth is so high? The minutes from the December 3–5 meeting explain the logic:

• The Growth Cliff: While Q2 was great, the RBI projects growth will slide to 7% in Q3 and 6.5% in Q4.⁴ The festive season high is wearing off, and the “pent-up demand” from GST rationalization is drying up.

• The Inflation Buffer: Inflation is currently “benign,” averaging around 2%.⁵ This gave Governor Sanjay Malhotra the “policy space” to slash rates without worrying about prices spiraling.⁶

• The Export Headache: Global trade is messy.⁷ Without a clear trade deal with the U.S. and merchandise exports already dipping 12% in October, the RBI needed to give domestic industries a cheaper way to borrow.⁸

The Sanjay Malhotra Era (1 Year In)

It’s been exactly one year since Sanjay Malhotra took over from Shaktikanta Das (Dec 11, 2024).⁹ In that time, he’s been remarkably aggressive:

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• Cumulative Cuts: 125 basis points in just 12 months.¹⁰

• The Philosophy: He’s clearly prioritizing “credit offtake.”¹¹ By making the External Benchmark Lending Rates (EBLR) cheaper, the goal is to get small and medium businesses (MSMEs) to start investing again.¹²

New Policy Rates (As of Dec 23, 2025)

And here’s the kicker: the Rupee recently breached the 90-to-a-dollar mark.¹³ Normally, that would make a central bank raise rates to protect the currency, but Malhotra is doubling down on growth instead. It’s a “neutral” stance that leaves the door open for more cuts if the Q4 numbers look even weaker.¹⁴

It’s an ongoing situation where the RBI is trying to cushion a “soft landing” for the economy. If your home loan is tied to the repo rate, you’re about to see your EMI drop.¹⁵ Again.

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