Rate Cut on the Radar: SBI Sees Room for RBI to Ease in 2025

Rama Mohan Rao Amara, Managing Director of International Banking and Treasury at SBI, has suggested that the Reserve Bank of India will more than likely consider a 25-basis-point cut in repo rate later in the year 2025. In a conversation with the Economic Times, Amara stated the central bank's next move will be data-led and will focus on economic growth in the context of evolving global and domestic conditions.

Critical Indicators from SBI

SBI is looking for a potential 25-bps repo rate cut this year, provided there is a positive macroeconomic environment

The bank expects the RBI to be cautious of inflation levels, monsoon results, and trade patterns before acting.

A change in policy to neutral from accommodative by the RBI has already caught the markets off guard, signaling a watchful but agile approach

Amara explained that the excess liquidity of ₹9 lakh crore in the banking system today is a relief compared to the shortage some months back

Liquidity Environment

Short-term interest rates have declined following recent repo and CRR cuts

SBI is also expecting short-term yields to decrease further, whereas long-term yields will be steady at 6.1%–6.4%

The rupee is likely to trade in the range of ₹84-₹86 against the US dollar

The bank is facing mobilization of deposits problems with the savers demanding better returns since the rate environment is deteriorating

Transmission in Progress

Loan books under the External Benchmark Lending Rate (EBLR) are growing steadily

As transmission rises, lenders can provide lower lending rates to borrowers

The complete effects of previous rate cuts are still being ironed out throughout the banking system

Growth vs. Risk Balance

Amara noted that RBI will take future choices into consideration based on inflation expectations, geopolitical risks, and imported inflation

A good monsoon and trade stability could provide the RBI with sufficient space to bolster growth through additional easing Despite hiccups, SBI is pinning hopes on customized customer engagement and technology-driven innovation to maintain momentum

Sources: The Economic Times, India Infoline, RBI Bulletin, SBI Research Report April 2025