RBI May Cut Rates by 25 bps, Says SBI Research
September 28, 2025
SBI Research predicts a 25 basis points rate cut by the Reserve Bank of India, noting that inflation is expected to remain stable and benign.
A SBI research report has pitched for a 25 bps rate cut, saying it is the 'best possible option' for the RBI, though some other experts opined that the central bank's rate-setting panel may again opt for status quo in its bi-monthly policy to be announced on October 1.
On expectations from the MPC, Madan Sabnavis, Chief Economist at Bank of Baroda said: "While we do believe that there is limited scope for any change in the repo rate in this policy, there is a market view that given the current environment, a rate cut would be warranted." He further said that, as inflation is anyway well below the target of 4 per cent both before and after GST 2.0, this cannot be a primary consideration. Also, growth is expected to steady and be upwards of 6.5 per cent for the year and hence there is no imminent threat to this number even after taking into account the tariff effect.
"Under these conditions, we expect a status quo. A change of stance could probably be considered to assuage sentiment and bond yields. If at all, at a later point in time, there is a package for exporters against the backdrop of tariffs, a rate cut could be considered," Sabnavis said.
"GST rationalisation is unambiguously set to moderate inflation. However, this is the outcome of a policy change and will likely be accompanied by stronger demand. This suggests a status quo for the repo rate in the October 2025 policy review, in what appears to be a close call," she said.
Effective September 22, Goods and Services Tax (GST) has become a two-tier structure of 5 per cent and 18 per cent. The earlier rates of 5, 12, 18, and 28 per cent have been clubbed into two rates of 5 per cent and 18 per cent, resulting in a reduced price of 99 per cent of daily use items.
Dharmakirti Joshi, Chief Economist, Crisil Limited, said: "We expect that a repo rate cut could come as soon as October due to lower-than-expected inflation. Core inflation, which indicates excess demand pressure, remains low by historical standards despite the significant impact of rising gold prices." The rationalisation of GST rates will also likely contribute to reducing inflation further, he said.
On expectations from the MPC, Madan Sabnavis, Chief Economist at Bank of Baroda said: "While we do believe that there is limited scope for any change in the repo rate in this policy, there is a market view that given the current environment, a rate cut would be warranted." He further said that, as inflation is anyway well below the target of 4 per cent both before and after GST 2.0, this cannot be a primary consideration. Also, growth is expected to steady and be upwards of 6.5 per cent for the year and hence there is no imminent threat to this number even after taking into account the tariff effect.
"Under these conditions, we expect a status quo. A change of stance could probably be considered to assuage sentiment and bond yields. If at all, at a later point in time, there is a package for exporters against the backdrop of tariffs, a rate cut could be considered," Sabnavis said.
"GST rationalisation is unambiguously set to moderate inflation. However, this is the outcome of a policy change and will likely be accompanied by stronger demand. This suggests a status quo for the repo rate in the October 2025 policy review, in what appears to be a close call," she said.
Effective September 22, Goods and Services Tax (GST) has become a two-tier structure of 5 per cent and 18 per cent. The earlier rates of 5, 12, 18, and 28 per cent have been clubbed into two rates of 5 per cent and 18 per cent, resulting in a reduced price of 99 per cent of daily use items.
Dharmakirti Joshi, Chief Economist, Crisil Limited, said: "We expect that a repo rate cut could come as soon as October due to lower-than-expected inflation. Core inflation, which indicates excess demand pressure, remains low by historical standards despite the significant impact of rising gold prices." The rationalisation of GST rates will also likely contribute to reducing inflation further, he said.