RBI Likely to Cut Interest Rate by 50 Bps Amid Growth Concerns, Says SBI
The Reserve Bank of India (RBI) may go for a 50-basis point rate cut in its June Monetary Policy Committee (MPC) meeting, according to a report by the State Bank of India (SBI) released on Monday.
New Delhi: The Reserve Bank of India (RBI) may go for a 50-basis point rate cut in its June Monetary Policy Committee (MPC) meeting, according to a report by the State Bank of India (SBI) released on Monday. The report suggests that such a “jumbo rate cut” could help counter rising economic uncertainties and stimulate credit growth.
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SBI Sees Scope for 100-Bps Cumulative Rate Cut in FY26
Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI, stated that domestic liquidity is in surplus mode, and inflation remains within the RBI’s tolerance band. This creates the ideal macroeconomic backdrop for a large rate cut.
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“We expect a 50 bps cut in June, and the cumulative rate cut during this cycle could reach 100 bps,” he noted.
Liquidity Surplus, Falling Deposit Rates Strengthen Rate Cut Case
The SBI report highlights that banks have already reduced savings account interest rates to as low as 2.70%, while fixed deposit (FD) rates have been lowered by 30–70 bps since February 2025. With ample liquidity—Rs 1.2 lakh crore surplus as of March 31—the transmission of rate cuts to customers is expected to strengthen in the coming quarters.
Inflation Projected at 3.5% for FY26
SBI has revised its Consumer Price Index (CPI) inflation estimate to 3.5% for FY26, citing:
- Above-normal monsoon forecasts by IMD
- Strong agricultural crop arrivals
- Decline in global crude oil prices
“With core liquidity expected to hit Rs 5.3 lakh crore by June-end, durable liquidity will remain surplus in FY26,” the report said.
Strong GDP Growth and Investment Trends Support Easing Bias
India’s Q4 FY25 GDP growth stood at 7.4%, driven by a 9.4% YoY increase in capital formation. The report adds that domestic finances are strong enough to sustain growth without triggering demand-push inflation.
Public Sector Banks Continue Stellar Performance
The financial health of Indian banks also supports monetary easing:
- PSB profits rose 26% YoY
- Private bank profits increased by 5.8% YoY
- RBI’s dividend of Rs 2.68 lakh crore has further boosted core liquidity
RBI’s Balancing Act Between Growth and Inflation
Given the easing inflation and surplus liquidity scenario, the RBI is now expected to shift focus toward supporting investments and growth, according to the SBI report.
“We expect that RBI will continue with its rate cut by 50 bps to support growth,” the report concluded.
