RBI should go for 25 bps cut in key policy rate: SBI Research
September 28, 2025
The Reserve Bank of India (RBI) should go for a 25 basis points (bps) cut in the key policy rate, a research report by the State Bank of India (SBI) said.
The Reserve Bank of India (RBI) should go for a 25 basis points (bps) cut in the key policy rate, a research report by the State Bank of India (SBI) said.
The report called it the “best possible option” ahead of the Monetary Policy Committee’s (MPC) bi-monthly review due on October 1.
Advertisement
The MPC, headed by RBI Governor Sanjay Malhotra, will begin its three-day deliberations on Monday amid heightened geopolitical tensions and the recent move by the US to impose 50 per cent tariffs on Indian shipments. The policy outcome will be announced on Wednesday.
According to SBI’s report, there is “merit and rationale” for a 25 bps reduction in the repo rate this time, as retail inflation is expected to remain subdued even in the next financial year
While the country’s largest lender has pitched for easing, some other experts believe the central bank may still choose to hold rates steady, continuing with its cautious wait-and-watch approach.
The central bank has already lowered the repo rate by 100 bps in three tranches starting in February, in response to easing consumer price index (CPI)-based inflation.
However, in its August review, the RBI maintained the status quo, preferring to assess the impact of global developments and US tariff measures on India’s economy.
A recent study published in the RBI’s latest Bulletin said the pass-through of the cumulative 100 bps reduction in the repo rate during February to August 2025 to lending and deposit rates has been robust.
Economists believed that the 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.
The new GST rates have now become a two-tier structure of 5 per cent and 18 per cent from the earlier rates of 5, 12, 18, and 28 per cent, resulting in a reduced price of 99 per cent of daily use items.
The report called it the “best possible option” ahead of the Monetary Policy Committee’s (MPC) bi-monthly review due on October 1.
Advertisement
The MPC, headed by RBI Governor Sanjay Malhotra, will begin its three-day deliberations on Monday amid heightened geopolitical tensions and the recent move by the US to impose 50 per cent tariffs on Indian shipments. The policy outcome will be announced on Wednesday.
According to SBI’s report, there is “merit and rationale” for a 25 bps reduction in the repo rate this time, as retail inflation is expected to remain subdued even in the next financial year
While the country’s largest lender has pitched for easing, some other experts believe the central bank may still choose to hold rates steady, continuing with its cautious wait-and-watch approach.
The central bank has already lowered the repo rate by 100 bps in three tranches starting in February, in response to easing consumer price index (CPI)-based inflation.
However, in its August review, the RBI maintained the status quo, preferring to assess the impact of global developments and US tariff measures on India’s economy.
A recent study published in the RBI’s latest Bulletin said the pass-through of the cumulative 100 bps reduction in the repo rate during February to August 2025 to lending and deposit rates has been robust.
Economists believed that the 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.
The new GST rates have now become a two-tier structure of 5 per cent and 18 per cent from the earlier rates of 5, 12, 18, and 28 per cent, resulting in a reduced price of 99 per cent of daily use items.