SBI Suggests 25 bps Rate Cut; Experts Say RBI May Maintain Status Quo

 

A recent SBI research report has recommended a 25 basis point reduction in the key lending rate, describing it as the “best possible option” for the Reserve Bank of India. However, some experts believe that the RBI’s Monetary Policy Committee (MPC) may maintain the current rates in its bi-monthly policy scheduled for announcement on October 1.

 

The three-day MPC meeting, chaired by RBI Governor Sanjay Malhotra, will begin on Monday. Policymakers will assess the domestic economy in the context of ongoing geopolitical tensions and the US imposing 50 percent tariffs on Indian exports.

 

In its August policy review, the central bank had maintained a wait-and-watch approach, keeping rates unchanged to evaluate the impact of global developments, including US tariffs, on India’s economy.

 

The SBI report highlighted that a 25 bps rate cut could be justified, as retail inflation is expected to remain low in the coming financial year.

 

Market Expectations

 

Madan Sabnavis, Chief Economist at Bank of Baroda, said, “While the likelihood of a change in the repo rate is limited, some market participants feel a rate cut may be warranted given current conditions. Inflation is below the 4 percent target, and growth is projected above 6.5 percent, leaving little immediate pressure on monetary policy. We expect a status quo, though a rate cut could be considered later if measures supporting exporters are introduced amid tariff pressures.”