State Bank of India’s (SBI) economic research team has suggested that a 25 basis point (bps) cut in the repo rate during the upcoming September 2025 Monetary Policy Committee (MPC) meeting would be the most prudent course of action for the Reserve Bank of India (RBI). The recommendation comes amid easing inflation, slowing consumption, and the need to stimulate economic growth without triggering financial instability.
According to SBI Research, a moderate rate cut would strike the right balance between supporting demand and maintaining fiscal discipline. The bank’s analysts noted that the interest rate cycle has already entered a downward phase, with the February and April 2025 MPC meetings delivering back-to-back 25 bps cuts. A further reduction in September could help sustain momentum in sectors such as housing, automobiles, and consumer durables, while also lowering EMIs for borrowers.
The report also highlighted that India’s Consumer Price Index (CPI) inflation is projected to average around 4.6% in FY25 and could drop to 3.9–4.0% in FY26, creating room for monetary easing. However, SBI cautioned that food inflation risks remain due to potential heatwave impacts on agricultural output. On the external front, the bank warned of global headwinds from trade barriers, currency volatility, and capital flow disruptions, which could weigh on growth.
SBI further indicated that a 25 bps cut would have only a minimal impact on its own net interest margins, given that just 28% of its loan book is repo-linked. The bank believes that a calibrated approach—rather than an aggressive rate-slashing spree—will allow the RBI to manage inflation expectations, support credit growth, and safeguard financial stability in the months ahead.