Archive · 6 Dec 2025
RBI Cuts Repo Rate, Governor Downplays Rupee Fall
The Reserve Bank of India (RBI) surprised everyone by cutting the repo rate, which is the rate at which banks borrow money from the RBI, by a small amount.
At the same time, the Indian rupee has been losing value against the US dollar, reaching beyond 90 rupees for one dollar.
The RBI governor said that this kind of fluctuation in the rupee's value is normal and that the market will find its own level.
He also mentioned that India has strong economic fundamentals and enough foreign reserves to handle this situation.
The depreciation of the rupee might make some imported goods like gold, edible oils, and pulses more expensive, but overall, the RBI believes the country is in a comfortable position.
RBI cut the repo rate by 25 basis points to 5.25% on Friday.
The rupee has depreciated by over 5% to beyond 90 against the dollar.
RBI Governor Sanjay Malhotra downplayed the rupee's fall, stating it's normal market volatility.
The RBI believes India's external sector is strong with sufficient reserves and manageable current account.
A 5% depreciation in the rupee is likely to push up inflation by 15-25 basis points annually.
- Who
- Reserve Bank of India (RBI) Governor Sanjay Malhotra
- What
- RBI cut repo rate by 25 basis points and addressed rupee depreciation
- When
- On Friday
- Where
- India
- Why
- To manage liquidity and address market volatility
- Repo Rate Cut
- 25 basis points to 5.25%
- Rupee Depreciation
- Over 5% to beyond 90 against the dollar
- Liquidity Injection
- Around ₹45,000 crore from $5 billion purchase
- Current Account
- About 1% of GDP
- Inflation Impact
- 5% depreciation leads to 35 bps rise in retail inflation
- Foreign Reserves
- Sufficient according to RBI
- Services Exports
- Likely to remain strong
- Merchandise Exports
- Face some headwinds
