Mumbai, Sept 23: The State Bank of India (SBI) has recommended that the Reserve Bank of India (RBI) consider a 25 basis points (bps) reduction in the repo rate during its upcoming Monetary Policy Committee (MPC) meeting, scheduled from September 29 to October 1, 2025. This recommendation is based on the current economic indicators, including subdued inflation rates and the potential benefits of further rate cuts.According to SBI’s Economic Research Department, the Consumer Price Index (CPI) for the fiscal year 2026-27 is projected to remain around 4% or lower. Notably, the Goods and Services Tax (GST) rationalization is expected to bring the October CPI closer to 1.1%, marking the lowest level since 2004. This decline in inflation is attributed to significant GST rate cuts and base revision effects.
SBI’s report, authored by Group Chief Economic Advisor Soumya Kanti Ghosh, cautions against a “Type 2 error”—a situation where the RBI fails to act when necessary. The report emphasizes that maintaining a neutral stance without a rate cut could miss an opportunity to support economic growth. It also highlights the importance of the RBI’s communication strategy, noting that post-June, the bar for rate cuts has become higher, requiring more calibrated messaging.
The RBI has already reduced the repo rate by 100 bps since February 2025, with cuts in February, April, and June. The August policy meeting saw the RBI pause rate cuts, adopting a neutral stance. SBI’s study suggests that a 25 bps rate cut in the upcoming meeting would align with the current economic conditions and project the RBI as a forward-looking central bank.
As the MPC prepares for its deliberations, all eyes will be on the RBI’s decision, which will be announced on October 1. The outcome will significantly influence economic sentiment and financial markets in the coming months.