SBI research – Bharat Pulse News

The Reserve Bank of India is widely expected to implement a sharp 50 basis point cut in the benchmark repo rate during its upcoming monetary policy review on June 6. The projection, made by the Economic Research Department of the State Bank of India, marks a significant shift toward monetary easing aimed at reviving a sluggish credit cycle and providing relief amid ongoing economic headwinds. Credit Growth Deceleration Triggers Concern Commercial bank credit growth, which stood at 19.5% a year ago, has cooled to 9.8% as of mid-May. This notable deceleration has raised alarm bells among policymakers and prompted calls for urgent stimulus. According to SBI Research, the banking sector is beginning to exhibit signs of tightening credit access, especially for small businesses and retail borrowers. A bold rate cut, it argues, is needed to rejuvenate demand and sustain economic momentum. Lower Inflation, Strong Monsoon Add Support The current macroeconomic environment supports a rate cut. Inflation remains within the central bank’s comfort zone, giving the RBI enough room to maneuver without destabilizing prices. Additionally, the timely arrival of monsoon rains is expected to boost rural demand and agricultural output, adding further justification for an accommodative monetary stance. Economists also note that with global interest rate trends shifting downward, the RBI can afford to take a proactive step without risking capital outflows or exchange rate volatility. What a 50 bps Cut Means If implemented, this would be the largest single-rate reduction by the RBI in several quarters. A cut of this magnitude would lower borrowing costs across the economy—from home and auto loans to corporate credit—making capital more accessible for both consumption and investment. However, while the move would ease financial stress for borrowers, it could also result in lower returns on savings instruments like fixed deposits, prompting a reallocation of household funds into equity or debt markets. The RBI’s Monetary Policy Committee, under the leadership of Governor Sanjay Malhotra, will begin its deliberations on June 4, with the final announcement expected on June 6. If the 50 basis point cut materializes, it would signal the central bank's intent to shift decisively from inflation control to growth stimulation, aligning policy with evolving domestic and global economic realities.

RBI May Slash Repo Rate by 50 bps to Spur Credit Growth

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