The Reserve Bank of India (RBI) is likely to cut its repo rate by an additional 75 basis points (0.75%) in the 2025-26 fiscal year, starting from April 1, according to SBI Research. This is based on the research firm’s analysis of the current repo rate cut cycle, which was initiated in February 2025 with a 0.25% reduction.
The expected rate cut would benefit borrowers, particularly those with repo-rate-linked home or other loans, as the interest rates on these loans will decrease in sync with the repo rate. This would lead to lower monthly loan payments for borrowers.
SBI Research also forecasts that Consumer Price Index (CPI) inflation will moderate to 3.9% in Q4 FY25 and average 4.7% in FY25. In FY26, the inflation rate is expected to range between 4.0-4.2%, with core inflation at 4.2-4.4%.
The report notes that the RBI adjusts its repo rate at bi-monthly monetary policy meetings to keep a lid on inflation. The CPI inflation in February 2025, for instance, was at a seven-month low of 3.6%, with notable variations across states, including 7.3% in Kerala but only 1.5% in Delhi.