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Formulated and conceived by the RBI (Reserve Bank of India), the monetary policy details the monetary matters and policies of the country. These matters include regulating the supply and availability of money in the Indian market and the credit scenario and its cost in the economy. This is done via managing the bank rates, interest rates, currency supply, variations in reserve requirements, open market operations and more. The policy also oversees the distribution of credit among users as well as the borrowing and lending rates of interest. In a country like India, monetary policy is very important in the promotion of economic growth. The monetary policy framework aims to set the policy repo and reverse repo rates as per the country’s prevailing macroeconomic situations. By making adjustments in these monetary policy measures, the apex bank aims at modulating the liquidity conditions in the market. The rise and fall in these rates decide the levels of savings and investments in the country, inflation levels, controlling exports and imports and monitoring the aggregate demand in the economy. This policy also helps in assessing which sectors in the country are in dire need of monetary support and allocate credit accordingly. The key indicators of monetary policy include CRR, SLR, Repo and Reverse rate, Bank rate and the Marginal Standing Facility Rate. More
While the RBI is expected to be in the long pause and stay on hold for entire FY27, Deepak Agrawal of Kotak Mahindra AMC anticipates the 10-year G-Sec yield to trade in the range of 6.60-6.80% in the near to medium term.
RBI is committed to proactive management of liquidity in the LAF window and the banking system, so as to keep short term yields rangebound.
RBI’s stance appears neither hesitant nor overly conservative. It reflects a pragmatic balancing act: preserving inflation credibility, supporting growth momentum and retaining sufficient policy ammunition should global conditions turn less benign.
Moneycontrol collated top 9 rate-sensitive stocks from experts to accumulate after the RBI policy decision:.
After front-loading rate cuts, the central bank focus is on transmission
Abhishek Bisen of Kotak Mahindra AMC expects the MPC to keep the repo rate unchanged to 5.25% and stance at neutral.
Since February, 2025, the MPC has reduced the repo rate by 125 bps to aid growth, with a 25 bps cut each in February and April, 50 bps in June, and 25 bps in December. However, the RBI has kept repo rate unchanged in August and October monetary policy.
The brokerage expects monetary conditions to remain supportive of growth, with liquidity improving alongside policy easing, setting the stage for a more durable transmission of rate cuts into the banking system.
On December 5, the central bank cut repo rate by 25 basis points to 5.25 percent after keeping rates unchanged for two times in a row
Overall, it was a well-balanced policy, and we expect a long pause in this cycle—much like a batter choosing not to swing at every delivery after finding the boundary early in the test innings.
The floor for the repo rate in this cycle has already been hit. This is because the guidance for H1FY27 Headline CPI is at 4 percent and with the current repo rate at 5.25 percent, the real gap is low at 1.25 percent.
Loans are set to get cheaper once again, which signals that banks are expected to play a pivotal role in lifting domestic growth, just like they did post pandemic. Is the market dynamics in favour of a quality credit growth; that’s the challenge ahead.
The MPC might want to see improved transmission of the cumulative rate cuts carried out so far.
The rate cut and upward revision in economic growth forecast was on expected lines given the fall in CPI inflation and sharp growth in economic numbers in September 2025 quarter.
RBI cut repo rate by 25 bps and announced OMOs plus a USD/INR swap to inject durable liquidity ahead of December tax outflows, easing rate and liquidity stress.
RBI projected Q3 FY26 inflation at 0.6% as compared to 1.8% earlier, and Q4 at 2.9% as compared to 4.0% earlier.
The RBI cut the repo rate by 25 bps to 5.25 percent as was widely expected, announced Rs 1 lakh crore of OMOs and a 3-year dollar–rupee swap, and raised FY26 GDP growth forecast to 7.3 percent.
The meeting is taking place against the backdrop of falling inflation, rising GDP growth, the rupee crossing 90 against the dollar and ongoing geopolitical tensions.
Experts are of the view that the central bank will announce some measures on the liquidity front such as Open Market Operations (OMO) purchases to support banking system liquidity during time when the activity in the forex intervention has increased after rupee crossed 90-mark.
The MPC started its three-day deliberation on the next set of bi-monthly monetary policy on Wednesday.
Deepak Agrawal of Kotak Mahindra AMC expects the RBI to revise its FY26 GDP growth forecast above 6.8 percent.
The RBI has so far reduced repo rate by 100 bps from 6.5% to 5.55 between February and June. After that, it RBI has maintained a status quo in the August and October policies.
The MPC will meet between December 3 and 5 for another round of rate setting deliberations.
Overall, the wait-and-watch policy of the RBI is prudent as it factors in incoming data prints into its reaction function.
While the MPC voted unanimously to keep policy rates unchanged, a couple of MPC members expressed their views for changing the policy stance from ‘neutral’ to ‘accommodative’.
