September 16, 2026
September 18, 2025
September 10, 2025
July 3, 2025
RBI Cuts Repo Rate to 5% in Oct 2026, Shifts Stance to Accommodative
Author
Shoonya Team
The Reserve Bank of India’s Monetary Policy Committee cut the policy repo rate by 25 basis points to 5% on October 8, shifting its stance from neutral to accommodative. The committee took the decision by a 5-1 majority, with one member dissenting. Governor Sanjay Malhotra said the easing was supported by softening inflation and stronger-than-expected growth, creating room to support economic momentum.
Policy Rates After the October Decision
| Rate | Previous Level | Revised Level |
|---|---|---|
| Policy Repo Rate | 5.25% | 5.00% |
| Standing Deposit Facility | 5.00% | 4.75% |
| Marginal Standing Facility | 5.50% | 5.25% |
| Bank Rate | 5.50% | 5.25% |
| Policy Stance | Neutral | Accommodative |
| MPC Vote | — | 5-1 |
Why the RBI Moved in October
The MPC’s decision rested on three developments since the August meeting:
- Headline CPI eased to 4.8% in August and was tracking below the Q3 projection of 5.9% set in August
- Q1 FY27 GDP grew 7.8%, above the RBI’s own projection of 7%
- Global crude prices softened from above $100 in September to around $80, reducing imported inflation risk
Malhotra said the committee saw an opportunity to support growth without compromising the medium-term inflation objective, given the improved outlook on both fronts.
RBI Upgrades GDP to 7.2% and Cuts CPI Forecast to 4.3% for FY27
The MPC revised both its growth and inflation projections for FY27:
| Indicator | August Forecast | October Revision |
|---|---|---|
| Real GDP Growth FY27 | 6.7% | 7.2% |
| CPI Inflation FY27 | 5.0% | 4.3% |
| Q2 FY27 CPI | 4.7% | 4.2% |
| Q3 FY27 CPI | 5.9% | 4.6% |
| Q4 FY27 CPI | 5.5% | 4.2% |
| Q1 FY28 CPI | 5.3% | 4.1% |
The sharp downward revision in the Q3 CPI forecast, from 5.9% to 4.6%, reflects the combined effect of softening global energy prices, a better monsoon outcome, and the easing of food prices through September.
What Does the Shift From Neutral to Accommodative Stance Mean?
A neutral stance means the MPC can move rates in either direction depending on incoming data. An accommodative stance signals that the committee’s next move, if any, is more likely to be a cut than a hike.
Malhotra said the shift was not a commitment to further cuts but reflected the balance of risks tilting toward supporting growth, given that inflation was now tracking earlier projections below.
How Global Conditions Shaped the Decision
The October meeting took place against a materially different global backdrop compared with August:
- Brent crude eased from above $107 in early September to around $80
- The US Federal Reserve held rates at its September meeting but signalled scope for easing later in the year
- West Asian tensions, while still present, had not escalated further into energy supply disruptions
- The rupee stabilised after its sharp move to 95+ levels in September
How the RBI Rate Cut Affects Housing, Banking, Bonds and the Rupee
| Sector | Assessment |
|---|---|
| Housing and real estate | Home loan rates likely to ease, supporting demand |
| Banking and NBFCs | NIMs may compress marginally; transmission pace key |
| Consumer durables and autos | Lower financing costs supportive of discretionary demand |
| Infrastructure and capex | Cheaper long-duration borrowing supports project economics |
| Bond markets | Yields likely to ease; accommodative stance signals further softening |
| Rupee | Near-term pressure if rate differential with US narrows further |
RBI MPC Minutes and Next Meeting: Key Dates to Watch
| Event | Date |
|---|---|
| MPC Minutes Release | October 22, 2026 |
| Next MPC Meeting | December 3-5, 2026 |
Final Outlook
October’s cut marks the first policy easing since the rate cycle turned, and the shift to an accommodative stance makes the direction of travel clear. The December meeting will be shaped by Q2 FY27 GDP data, the October and November CPI prints, crude oil movement, and how the US Fed’s own rate path evolves. Whether the RBI moves again in December or pauses will depend on whether the improved inflation trajectory holds through the second half of Q3.
Source: Reserve Bank of India
Explore Our Offerings
Stocks
Trade equities across NSE and BSE with zero delivery charges. Invest, hold or sell with a seamless experience.
Future & Options
Execute complex strategies with simple tools and real-time data.
IPOs
Apply to the latest IPOs in just a few taps. Stay updated and capture opportunities as they open.