RBI should opt for 25bps repo rate cut, says SBI
What's the story
A recent report by the State Bank of India (SBI) has recommended a 25 basis points (bps) cut in the repo rate for the upcoming Reserve Bank of India (RBI) monetary policy meeting. The suggestion comes amid expectations of benign inflation. However, most economists expect the Monetary Policy Committee (MPC) to maintain the status quo when it announces its decision on October 1.
Rate reduction
'Best possible option'
The SBI report has described a 25bps rate cut as the "best possible option" for RBI. This comes after the central bank had slashed the key short-term lending rate (repo) by 100bps in three installments since February, amid falling consumer price index (CPI)-based inflation. However, some experts believe that the MPC may choose to maintain its current stance in its upcoming policy review meeting.
Meeting agenda
MPC to meet from October 1-3
The MPC, headed by RBI Governor Sanjay Malhotra, will hold a three-day meeting from Monday to discuss the policy rate. The meeting comes against the backdrop of ongoing geopolitical tensions and the US imposing 50% tariffs on Indian shipments. In its August bi-monthly monetary policy review, the central bank had opted for a status quo while assessing how these factors would impact India's economy.
Policy effects
Expectations of repo rate cut
Aditi Nayar, Chief Economist at ICRA, said GST rationalization could lower headline CPI prints by 25-50bps during Q3 FY2026 - Q2 FY2027. She also expects October-November 2025 to mark a new low for CPI inflation but anticipates an upward trajectory afterward. Dharmakirti Joshi of Crisil Limited expects a repo rate cut as early as October due to lower-than-expected inflation and strong demand.