• RBI lowered the repo rate by 125 bps to boost loans, spending, and growth
• 3,500+ circulars merged into clear Master Directions, easing compliance
• Growth supported while keeping inflation, risks, and stability in check

As 2025 draws to a close, the Reserve Bank of India (RBI), led by Governor Sanjay Malhotra, has delivered a masterclass in adaptive policymaking. Confronted with unusually low inflation dipping to record lows below 2 percent robust GDP growth exceeding 8 percent in key quarters, and external challenges like trade uncertainties, the RBI slashed the repo rate by a cumulative 125 basis points, bringing it to 5.25 percent.

This aggressive easing, the most substantial since the pandemic, has eased borrowing costs for millions while preserving macroeconomic stability.

Complementing this, a sweeping regulatory cleanup consolidated thousands of outdated circulars into clear Master Directions, alongside targeted reforms in lending and payments.

These twin pillars monetary stimulus and regulatory clarity have empowered households, businesses, and the broader economy, paving the way for sustained growth amid global headwinds.

RBI’s 2025 Rate-Cut Cycle

The RBI's monetary policy in 2025 unfolded as a calculated response to benign inflation and strong domestic fundamentals. Starting the year at 6.50 percent, the repo rate saw measured reductions across multiple MPC meetings.

Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank, echoes, “We welcome the RBI’s decision to reduce the repo rate by 25 basis points to 5.25 per cent while maintaining a neutral stance. This policy supports growth while keeping inflation at or below the 4 per cent target, with real GDP expected at 7.3 per cent for 2025-26 (Q3 at 7.0 percent, Q4 at 6.5 per cent, Q1 2026-27 at 6.7 per cent and Q2 at 6.8 percent). The rate cut is expected to ease borrowing costs, spur demand in housing and real estate, support MSMEs and sustain personal and auto loan growth”.

February's 25 bps cut to 6.25 percent initiated the cycle, reflecting confidence in cooling prices. April followed with another 25 bps trim to 6.00 percent, shifting the stance to accommodative amid easing global pressures. The standout move came in June a jumbo 50 bps reduction to 5.50 percent, paired with CRR cuts to infuse liquidity and prioritize growth.

After pauses in August and October to assess transmission and external risks, December delivered a unanimous 25 bps cut to 5.25 percent, with inflation forecasts slashed to 2.0 percent and GDP upgraded to 7.3 percent for FY26. Supporting this, the RBI injected Rs 1 lakh crore via OMOs and a $5 billion USD/INR swap, ensuring durable liquidity.

Banks transmitted benefits promptly, with lenders like SBI and PNB lowering rates, reducing EMIs on home and auto loans significantly savings potentially reaching lakhs over loan tenures for borrowers. This easing has spurred consumption, capex, and real estate demand, cushioning the economy without fueling inflationary risks.

Ashish Narain Agarwal, Founder & MD, PropertyPistol, “The move to cut the repo rate to 5.25% is a positive step for homebuyers, especially in pricier metros like Mumbai, where affordability is the primary friction. A 25-bps reduction can lower the EMI on a Rs 50-lakh home loan by roughly Rs 750-Rs 800 over 20 years, providing the psychological nudge many salaried buyers need. However, the strategic value of this cut depends on how borrowers utilise it".

Also Read: How RBI's Calculated Repo Move is Quietly Rewriting India's Credit Playbook

The RBI’s Big Reset

Parallel to monetary easing, 2025 witnessed a regulatory renaissance. The RBI issued over 80 updates, culminating in a landmark November 28 consolidation, over 3,500 circulars streamlined into 244 Master Directions, repealing 9,446 obsolete ones some from the 1940s.

This reduced compliance burdens by up to 30 percent, providing regulated entities with clear, sector-specific guidelines.

• KYC Overhaul: New sector-specific Master Directions replaced the 2016 framework, emphasizing risk-based periodic updates and accessibility, while reaffirming Aadhaar's non-mandatory status.
• Gold Loans: Stricter norms limited loans to jewelry/coins, introduced tiered LTV ratios (up to 85 percent for smaller amounts), bullet repayment rules capped at 12 months, and borrower safeguards like transparent valuations to curb risks and speculation.
• ECB Liberalization: Replaced rigid $750 million caps with dynamic, risk-based limits, eased lender eligibility and end-use restrictions for infrastructure and green projects, with market-determined pricing to boost inflows.
• Digital Lending: Enhanced transparency and consumer protection through Key Facts Statements and data privacy mandates.
• Payment Systems: New norms for aggregators (Rs 15-25 crore net worth requirement), standardized nominations, continuous cheque clearing from October.
• Other Reforms: Amendments to cash credit/overdraft accounts to prevent diversions, expanded co-lending, priority sector lending tweaks, Basel-aligned capital rules.

These principle-based, consultative changes modernized oversight, balancing innovation with prudence.

Wrapping It Up!

The RBI's 2025 actions intertwined easing and reform to foster resilience. Rate cuts lowered costs, reviving demand, while regulatory streamlining slashed redundancies, empowering entities with transparent rules and safeguarding against risks like over-leveraging.

With reserves surpassing $687 billion and growth momentum intact, Governor Malhotra's data-driven approach has turned challenges into opportunities. For households, affordable loans offer relief, for businesses, simplified access unlocks expansion.

As India strides toward Viksit Bharat, the RBI's prudent yet progressive playbook has fortified the financial ecosystem, ensuring inclusive, sustainable progress in an uncertain world.