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Key Points

The SBI report suggests that the Reserve Bank of India might cut rates by 50 basis points to maintain economic growth and counter uncertainty. Dr. Soumya Kanti Ghosh highlights decreased liquidity concerns and stable inflation as factors supporting this decision. The domestic economy is buoyed by reduced crude prices and a promising monsoon, potentially leading to lower CPI predictions. With the Indian banking sector showing robust financial performance, the RBI's decision could further bolster investments and growth.

Key Points: RBI Eyes 50 bps Rate Cut to Combat Uncertainty Says SBI

  • SBI forecasts 50 bps RBI rate cut in June for economic stability
  • Inflation likely within target, supporting rate decisions
  • Strong monsoon and crop arrivals may lower CPI to 3.5%
3 min read

RBI may go for 50 bps jumbo rate cut to counter uncertainty: SBI report

RBI considers a 50 bps rate cut in June to sustain growth amidst uncertainty, SBI suggests.

RBI may go for 50 bps jumbo rate cut to counter uncertainty: SBI report
"Keeping the domestic growth momentum intact should be the main policy focus. - Dr. Soumya Kanti Ghosh"

New Delhi, June 2

The SBI report on Monday projected a mega 50-basis point rate cut in June’s RBI MPC policy, and a large rate cut could reinvigorate a credit cycle and act as a counterbalance to uncertainty.

The cumulative rate cut over the cycle could be 100 basis points, said Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

“Domestic liquidity and financial stability concerns have receded. Inflation is expected to stay within the tolerance band. Keeping the domestic growth momentum intact should be the main policy focus and provide the justification for a jumbo rate cut,” he mentioned.

With liquidity in an extended surplus mode, liabilities are getting repriced faster in the current rate-easing cycle. Banks have already reduced interest rates on savings accounts to the floor rate of 2.70 per cent.

Also, fixed deposit (FDs) rates have been reduced in the range of 30-70 bps since February 2025. Transmission to deposit rates is expected to be strong in the coming quarters, said the SBI report.

India’s economy grew by 7.4 per cent in Q4 FY25 as against 8.4 per cent growth in the same quarter last fiscal. From the expenditure side, the GDP growth of 7.4 per cent in Q4 was supported by a strong uptick in the capital formation, which registered a 9.4 per cent YoY growth.

“Above normal monsoon prediction by IMD, strong arrival of crops and decline in crude oil prices are revising down our CPI estimate to 3.5 per cent in FY26 with a downward bias,” said the report.

With higher anticipated savings based on the latest RBI Annual report, the domestic finances will be sufficient to finance the anticipated growth and “we do not expect demand-induced pressure on prices in FY26”.

Domestic financial stability risk has receded. Indian banks (particularly PSBs) exhibited yet another quarter of stupendous financial results. Profit of PSBs increased by a whopping 26 per cent YoY, while for private banks, it increased by only 5.8 per cent.

System liquidity turned to surplus mode and stands at Rs 1.2 lakh crore on March 31.. With the RBI dividend of Rs 2.68 lakh crore, “we are expecting core liquidity of Rs 5.3 lakh crore by June-end. Durable liquidity is likely to remain surplus in FY26.”

Within this backdrop, RBI's response function has to balance the call between contained inflation and possible slowdown in domestic growth and support investments.

“We expect that RBI will continue with its rate cut by 50 bps to support growth,” the SBI report added.

- IANS

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Reader Comments

R
Rajesh K.
Finally some good news for home loan borrowers! This 50bps cut will make EMI payments lighter. Though I hope banks pass on the full benefit to customers quickly. Last time rate cuts took months to reflect in loan rates. 🏠
P
Priya M.
As a senior citizen depending on FD interest, this is worrying. Rates already at 6.5% for 5-year FDs, another cut will hurt savings. RBI should balance growth with protection for savers too.
A
Amit S.
Smart move by RBI if they go for 50bps cut. With inflation under control and monsoon predictions good, this will boost business investments. MSME sector especially needs this push to recover fully post-pandemic.
N
Neha T.
Hope this doesn't lead to reckless lending again. Remember what happened during 2008 crisis? RBI should ensure banks maintain strict credit discipline even with lower rates. Growth is important but not at cost of stability.
V
Vikram J.
Good analysis by SBI. The 7.4% GDP growth is decent but we need to push it higher to create more jobs. Rate cut should help but government must also speed up infrastructure projects to complement this monetary policy move.
S
Sunita R.
RBI should be careful about inflation though. Petrol prices may be down now but what if global oil prices spike suddenly? We don't want to end up like Sri Lanka with runaway inflation. Better to go for 25bps now and wait.

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