RBI May Cut Repo Rate By 50 Bps On June 6 To Boost Growth: SBI Analysis

New Delhi, Jun 2 (KNN) The Reserve Bank of India is anticipated to announce a significant 50 basis points reduction in the repo rate during its monetary policy announcement scheduled for June 6, according to a recent analysis by the State Bank of India.

The assessment suggests that such a substantial rate cut could serve as a catalyst to reinvigorate the credit cycle, with total rate reductions potentially reaching 100 basis points over the complete easing cycle.

The banking sector is currently experiencing extended surplus liquidity conditions, which has accelerated the repricing of liabilities during the ongoing rate-easing environment.

Commercial banks have already adjusted their savings account interest rates downward to a floor rate of 2.70 percent, while fixed deposit rates have declined by 30 to 70 basis points since February 2025.

Market analysts expect this transmission of rate cuts to deposit rates to continue robustly in upcoming quarters.

Economic indicators supporting the case for aggressive monetary easing include improved domestic liquidity conditions and reduced financial stability concerns.

Inflation metrics are projected to remain within the central bank's acceptable tolerance range, allowing policymakers to prioritize growth momentum maintenance as the primary objective of monetary policy decisions.

India's economic performance in the fourth quarter of fiscal year 2025 showed gross domestic product growth of 7.4 percent, representing a deceleration from the 8.4 percent expansion recorded in the corresponding quarter of the previous fiscal year.

The growth trajectory was primarily driven by robust capital formation, which registered a 9.4 percent year-on-year increase, indicating sustained investment activity across sectors.

Additional supportive factors for the monetary policy outlook include the Indian Meteorological Department's forecast of above-normal monsoon conditions, strong agricultural crop arrivals, and declining global crude oil prices.

These developments have prompted the State Bank of India to revise its consumer price inflation projection for fiscal year 2026 to approximately 3.5 percent, with a downward bias indicating potential for even lower inflation rates.

The banking institution's analysis further indicates that anticipated higher household savings, as referenced in the Reserve Bank's latest Annual Report, would provide sufficient funding capacity to support the country's growth requirements without generating demand-driven inflationary pressures during fiscal year 2026.

This favourable savings-investment dynamic reinforces the argument for accommodative monetary policy measures to sustain economic expansion.

(KNN Bureau)