The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has begun its three-day meeting, with the outcome to be announced by RBI Governor Sanjay Malhotra on October 1, 2025. The discussions will center on evaluating the current economic landscape and determining necessary adjustments to policy rates to manage inflation. The decision is being closely watched by a wide range of stakeholders, from the general public to corporations and policymakers, all of whom are keen for clarity on the future direction of interest rates.
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Expectations for a rate cut are mixed. According to Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at the State Bank of India, “A rate cut in September is the best possible option for RBI which also projects it as a forward-looking central bank… And moving ahead 25bps rate cut in September can be the best possible option for RBI.”
This viewpoint is based on the idea that proactive monetary policy can help stimulate economic activity and maintain a positive growth trajectory. Since August 2025, the repo rate has been held at 5.5 percent, and a reduction would signal the RBI’s confidence in the economy’s stability and its willingness to support further expansion.
In contrast, the credit rating firm ICRA anticipates a different outcome. Aditi Nayar, Chief Economist at ICRA, believes the MPC is likely to maintain the status quo on the repo rate during its October 2025 review. This position is supported by several factors, including the positive impact of recent GST reforms on consumer demand, a stronger-than-expected GDP performance in the first quarter of the fiscal year 2026, and an inflation trajectory that, while lowered by GST rationalization, is expected to tick upwards thereafter. The decision to hold rates would reflect a cautious approach, prioritizing long-term price stability over short-term growth stimulation.
Since February 2025, the RBI has implemented a total of 100 basis points in rate cuts. These reductions have historically provided significant relief to the economy, boosting business confidence and offering a positive outlook for homebuyers and banks by making borrowing more affordable. The MPC’s forthcoming decision will not only impact lending rates but will also serve as a crucial indicator of the RBI’s economic forecast, influencing investment decisions and market sentiment across the country.
