Is RBI Going for 50 Bps Rate Cut: What SBI Report Says?

In its latest economic outlook, the State Bank of India (SBI) forecasts that the Reserve Bank of India (RBI) is likely to reduce the repo rate by 50 basis points during its upcoming monetary policy meeting scheduled for June 6. This expected move is positioned as a proactive strategy aimed at revitalising the decelerating credit cycle and boosting overall economic momentum.

Surplus Liquidity to Back Rate Cut

The report by Soumya Kanti Ghosh, SBI’s Group Chief Economic Adviser, points out that the current banking environment is marked by surplus liquidity. This has accelerated the downward adjustment of deposit rates, with savings account interest rates dipping to 2.70%, and fixed deposit rates declining by 30–70 basis points since February 2025.

"We project a 50-basis point rate cut in the June 2025 policy, as a substantial reduction could help jumpstart the credit cycle," the report notes. SBI also estimates that the cumulative repo rate cut during this easing phase could extend to 100 basis points.

The report further indicates that earlier apprehensions surrounding domestic liquidity and financial stability have eased considerably. Inflation remains well within the RBI's target band, contributing to a favourable backdrop for monetary easing.

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SBI on CPI Inflation

Revising its inflation outlook, SBI now expects Consumer Price Index (CPI) inflation to average around 3.5% in FY26. This revision is attributed to optimistic factors such as the India Meteorological Department’s (IMD) above-normal monsoon prediction, improved agricultural output, and falling global crude oil prices.

On the growth front, India’s GDP expanded by 7.4% in Q4 FY25—a slowdown from 8.4% in the same quarter of the previous year. This performance was largely underpinned by robust capital formation, which saw a year-on-year increase of 9.4%.

The SBI report emphasises that preserving and enhancing economic growth should remain the central objective of monetary policy, thereby justifying the case for a deeper rate cut in the upcoming policy cycle.

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