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The Reserve Bank of India (RBI) is likely to announce a significant 50-basis point cut in the repo rate during its upcoming monetary policy meeting on June 6, according to a report by the State Bank of India (SBI). The move, SBI says, could kick-start a new credit cycle and support broader economic growth.

"We expect a 50-basis point rate cut in June 2025 policy as a large rate cut could reinvigorate a credit cycle," the SBI report stated, suggesting that the total rate cut through the easing cycle could eventually reach 100 basis points.

The report underscores that the current liquidity situation in the banking system remains in a prolonged surplus mode. As a result, banks are quickly adjusting liabilities, with savings account interest rates already at a floor of 2.70 per cent. Fixed deposit (FD) rates have also been lowered by 30 to 70 basis points since February 2025.

SBI expects this strong transmission of rate cuts to continue, further supporting economic activity in the months ahead.

According to the report, domestic financial conditions have stabilised, and inflation is well within the RBI’s tolerance band. With macroeconomic fundamentals in place, the focus of monetary policy should now shift toward sustaining growth momentum.

Indian GDP

India’s GDP grew by 7.4 per cent in the fourth quarter of FY25, a slight moderation from 8.4 per cent in the same quarter of the previous fiscal. This growth was driven primarily by a 9.4 per cent year-on-year increase in capital formation, according to the report.

SBI also cited favourable macro tailwinds, including the Indian Meteorological Department’s forecast of an above-normal monsoon, robust crop arrivals, and easing global crude oil prices. These factors have prompted the bank to revise its CPI inflation estimate for FY26 to around 3.5 per cent with a downward bias.

Additionally, the report highlights improved household savings, as mentioned in the RBI’s latest annual report, which are expected to comfortably finance economic expansion without stoking demand-driven inflation.

With inflation under control and liquidity ample, SBI’s call for a “jumbo” rate cut signals confidence in the RBI’s ability to balance growth and price stability in the upcoming fiscal year.