RBI’s December 2025 Monetary Policy: A Calibrated Shift Toward Growth, Stability & Liquidity — SMEStreet Exclusive Analysis

The Reserve Bank of India’s Monetary Policy Committee (MPC) on December 5, 2025, has delivered one of the most consequential policy moves in recent years — a 25-basis-point repo rate cut, a neutral stance, and a strong liquidity infusion roadmap. The announcements signal a calibrated but confident shift toward supporting India’s next phase of economic expansion, even as global uncertainties persist.

This policy sets the tone for 2026: cheaper credit, stronger liquidity, improved consumption, and a growth-first macro strategy.

A Decisive Policy Turn Anchored in Disinflation

A key highlight of the policy is the MPC’s confidence in India’s underlying disinflation momentum.
Ms. Radhika Piplani, Chief Economist, Motilal Oswal Group, noted:

“The MPC’s decision was assertive — the committee delivered on both rate cuts and liquidity support. The Governor noted disinflationary pressures in the economy, which created room for a rate cut despite ongoing trade uncertainties and early signs of weakness in indicators such as the IIP and electricity demand.”

She further highlighted the potential for another 25-bps cut in February 2026, supported by expectations of continued downside surprises in inflation.

One standout element is the ₹1.5 lakh crore durable liquidity injection planned for December alone, indicating the RBI’s intent to accelerate liquidity transmission. Piplani added:

“We anticipate additional OMOs in the February policy, especially as pressure on the USDINR exchange rate is likely to prompt further dollar sales by the Central Bank.”

A Growth-Positive Signal With 2026 Outlook Strengthening

A major takeaway of this policy is the upgrade in India’s GDP growth projection to 7.3% (from 6.8%).

Mr. Saurav Ghosh, Co-founder, Jiraaf, captured this sentiment clearly:

“With its 25-basis-point repo rate cut and reaffirmation of a neutral stance, the RBI has struck a careful balance between price stability and growth support... This step ushers in a new policy era aimed at enabling cost-effective borrowing to power infrastructure, business expansion, and consumer demand.”

By keeping the door open for another potential rate cut, the RBI is signalling — without ambiguity — that growth will remain a policy priority as long as inflation stays anchored.

Liquidity Surplus + Rate Cuts = Coordinated Push for Growth

The RBI has backed monetary easing with structural liquidity enhancement, including:

• ₹1 lakh crore government bond purchases (OMO)

• USD 5 billion long-tenure swap

• Advance liquidity support to banks

Vijay Kuppa, CEO, InCred Money, described the coordinated policy move:

“After the government’s fiscal boost through GST cuts, monetary policy has now moved in tandem — a rate cut made possible by inflation falling far below expectations… The RBI is bolstering market liquidity through a ₹1 lakh crore OMO and a USD 5 billion swap.”

Together, these steps aim to boost credit availability, strengthen market confidence, and ensure smoother monetary transmission in early 2026.

Impact on Borrowers, Housing Market & Lending Ecosystem

The housing sector stands out as one of the immediate beneficiaries of the rate cut.

Kunal Shah, Co-founder, SURE, explained the tangible relief for homebuyers:

“For a home loan of ₹50 lakhs, borrowers could save around ₹1.80 lakh over 20 years due to the rate cut… The cut is timely and will bring relief for homebuyers, lowering EMIs and boosting housing demand.”

He also highlighted its broader implications:

• Short-term margin pressures on banks

• Higher long-term credit demand

• A favourable lending environment through 2026

Reeza Sebastian Karimpanal, Chief Revenue Officer – Residential, Embassy Developments Ltd., echoed how the real estate market gains structural clarity:

“With inflation softening and the central bank reaffirming confidence in India’s economic trajectory, the rate cut brings clarity and support to the real estate ecosystem.”

Luxury housing remains resilient, but mid-income and first-time buyers will feel the immediate benefit.

Credit, Consumption and Financial Sector Boost Strengthened

The MPC’s decision reinforces a broader confidence cycle across financial services.

Amit Prakash, Co-founder & CEO, Urban Money, stated:

“The 25-basis point reduction strengthens monetary support as domestic fundamentals remain constructive… The cut reinforces transmission as lending rates trend lower.”

The reduction, combined with improved liquidity, is expected to:

• Lower borrowing costs

• Support retail credit and MSME lending

• Improve financial conditions for NBFCs and fintechs

At the consumer level, falling rates bolster purchasing power and encourage long-term planning — something vital for housing, auto, and personal loan verticals.

Digital Lending, Household Consumption & MSME Credit To Gain Momentum

Fintech leaders are optimistic about how liquidity and lower rates will stimulate credit flows.

Ashish Goyal, Co-Founder & Whole Time Director, Fibe, emphasized:

“The total 125 bps reduction in 2025 signals a strong shift toward supporting growth… Lower rates strengthen household purchasing power and push higher consumption as everyday credit becomes more accessible.”

He added that large-scale liquidity injections will support:

• Smoother credit transmission

• Strengthening MSME lending

• Financial market stability

• A consumer-centric lending ecosystem

SMEStreet Analysis: A Policy Setting the Foundation for India@2030

The December 2025 MPC outcome is more than a rate action — it is a strategic alignment of fiscal and monetary forces to power India's next phase of high-growth.

Our analysis highlights five major implications:

1. Credit Cycle Acceleration

Lower rates + durable liquidity = rising loan demand in MSMEs, housing, and consumer finance.

2. Macro Stability Remains Intact

The RBI has cut rates without compromising inflation discipline — signalling confidence in the economy’s disinflation trajectory.

3. Boost for Real Estate, Infrastructure & Capex

Developers, EPC companies, and homebuyers will feel direct benefits, improving sector outlook for 2026.

4. Strengthening Domestic Demand

Higher consumption due to lower EMIs and increased liquidity amplifies retail sector revival.

5. Positive Momentum for Financial Markets

Bond yields ease, banks gain credit appetite, and equities may re-rate based on stronger growth fundamentals.

Conclusion: A Pivotal Moment for India’s Economic Trajectory

The RBI’s December 2025 MPC meeting is a watershed moment — subtle yet transformative.
With inflation easing, liquidity improving, and growth prospects strengthening, the central bank has engineered a policy environment conducive to investment, consumption, and expansion.

As India enters 2026, this policy marks a confident step toward building a stable, high-growth, low-inflation economy — aligned with the ambitions of Viksit Bharat 2047.

For SMEStreet, this policy marks the beginning of an exciting phase where MSMEs, financial institutions, homebuyers, and emerging sectors stand to gain significantly from a growth-supportive monetary environment.