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Informist, Friday, Dec. 5, 2025

 

MUMBAI - Following are the highlights of Reserve Bank of India Governor Sanjay Malhotra's statement on Friday after the fifth bi-monthly meeting of the Monetary Policy Committee for 2025-26 (Apr-Mar):

 

KEY TAKEAWAYS

* MPC voted to cut repo rate
* MPC voted to cut repo rate by 25 bps to 5.25%
* MPC voted 6-0 to cut repo rate
* SDF rate adjusted to 5.00%
* MSF and Bank rate adjusted to 5.50%
* MPC decided policy stance to remain 'neutral'
* MPC Singh was of the view stance should be accommodative from neutral
* Minutes of Dec MPC meeting to be released on Dec 19

MACROECONOMY

* Look back at year so far with satisfaction
* In last month of eventful, challenging 2025
* Approach new year with vigour to support economy
* Aim to accelerate progress, support econ in 2026
* Growth-inflation balance continues to provide policy space
* Current growth inflation dynamics show rare Goldilocks period
* Econ activity H1 benefitted from rationalised income tax, GST
* Econ activity H1 benefitted from lower crude prices
* Some signs of weakness in few leading indicators of growth
* High frequency data suggest econ activity holding up in Q3
* Urban demand recovering steadily
* Investment activity remains healthy
* Farm growth supported by healthy kharif output, rabi sowing
* Mfg activity continues to improve, svcs sector steady
* Agri growth aided by healthy kharif, higher reservoir levels
* Congenial monetary policy condition to support econ activity
* Congenial economic, fincl conditions to support econ activity
* Domestic factors seen supporting econ activity
* Continued reforms should support econ
* Will continue to meet productive needs of econ proactively
* Will continue to meet econ needs with macro stability
 

INFLATION

* Cut FY26, Q1 FY27 inflation projections
* Revises FY26 CPI inflation forecast to 2.0% from 2.6%  earlier
* Revises Oct-Dec CPI inflation forecast to 0.6% from 1.8%  earlier
* Revises Jan-Mar CPI inflation forecast to 2.9% from 4.0%  earlier
* Revises Apr-Jun FY27 CPI inflation forecast to 3.9% from 4.5%
* Projects Jul-Sept FY27 CPI inflation at 4.0%
* Inflation going to be softer than projected in Oct
* Decline in inflation has become more generalised
* Food supply prospects better
* International commodity prices likely to moderate
* Faster than anticipated decline in CPI on food prices fall
* Core CPI largely contained in Sept-Oct
* CPI likely to be softer than earlier projection
* Core inflation seen remaining anchored in period ahead
* Underlying inflation pressures even lower than headline shows
* Witnessed rapid disinflation
* Since Oct policy, India saw rapid disinflation
* CPI breached lower bound of flexible inflation aim in Q2
* Risks to inflation forecasts are evenly balanced
* Rise in precious metal prices adding 50 bps to headline CPI
* Headroom from CPI outlook given space to support econ
 

GROWTH

* Revises FY26 GDP growth forecast to 7.3% from 6.8%
* Revises Oct-Dec GDP growth forecast to 7.0% from 6.4%  earlier
* Revises Jan-Mar GDP growth forecast to 6.5% from 6.2%  earlier
* Revises Apr-Jun FY27 GDP growth estimate to 6.7% from 6.4%  earlier
* Projects Jul-Sept FY27 GDP growth at 6.8%
* Risks to growth forecasts are evenly balanced
* Indian econ poised for high growth
* Growth has been relatively strong
* Growth to soften somewhat
* Low headline, core CPI gave MPC room to provide growth support
 

FINANCIAL SECTOR

* To buy INR 1 tln worth of bonds via OMO auctions
* To buy INR 1 tln worth of bonds via OMO in Dec
* To conduct FX buy/sell swap of 3 year
* To conduct 3-yr $5 bln dlr/rupee buy/sell swap in Dec
* Money market rates largely aligned to repo rate
* G-sec yields remained rangebound since last policy
* Transmission of rate cuts broad based, satisfactory
* Committed to provide sufficent durable liquidity
* Continuously assess durable liquidity needs of banking system
* Hopeful OMO, FX swap will facilitate monetary transmission
* Hopeful OMO buys, FX swap will ensure sufficient liquidity
* Using VRR, VRRR to maintain weighted avg call rate near repo
* Can simultaneously conduct OMO buys, VRRR ops
* Primary instrument of monetary policy is repo rate
* Primary purpose of OMOs is to give sufficient liquidity
* Primary purpose of OMOs not to influence gilt yields
* Fincl parameters of banks remain robust
* OMO main purpose is liquidity mgmt, not influencing g-sec ylds
* Total flow of resources to commercial sector strengthened
* Bank credit has seen uptick
* Outstanding credit from bank, non-bank sources up 13% YoY
* Large industries recorded credit growth

 

EXTERNAL SECTOR

* Confident of meeting external financing needs comfortably
* India extenal sector remains resilient
* Healthy svcs exports, remittances to keep CAD modest
* CAD to remain modest FY26
* Gross FDI H1 grew at healthy pace
* External uncertainties pose downward risk to econ outlook
* Merchandise exports faced some headwinds
* Speedy conclusion of various FTAs, trade deals present upside
* Conclusion of various trade deals present upside potential
* Import cover from FX reserves of over 11 months
* Forex reserves at $686 bln as on Nov 28
* Geopolitics, trade uncertainties remain

 

MISCELLANEOUS

* Focusing on improving customer services
* Over 99.8% of application disposed of in Citizens' charter
* Exhort all regulated cos to keep customers central in ops
* Customer grievance pendancy with RBI ombudsmen has increased
* Exhort all regulated entities to reduce customer grievences
* Exhort all regulated cos to improve customer support
* Plan 2-month campaign to resolve complaints with Ombudsman from Jan
End

 

US$1 = INR 89.98

 

Compiled by Vinod Bhovad

Filed by Vandana Hingorani

 

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