June 3, 2025 - There is a strong possibility that loans will become cheaper in India going forward. A new SBI report has predicted that in the RBI's Monetary Policy Committee (MPC) meeting on June 6, the Repo Rate could be cut by 0.25% to 0.50%.

The report refers to the impending move as a “jumbo” cut in order to revive credit demand. It also says that inflation will remain under control even with the rate cut, while economic growth will receive a push. However, new policies and regulations are needed to make interest rate changes more effective in the banking sector, the report emphasises. It elaborates that the Indian banking has ample liquidity. Because of this and with its strong financial stability, RBI rate cuts will be transmitted to deposit and lending rates.

“We expect a 50-bps rate cut in the June 2025 policy, as a large cut could reinvigorate the credit cycle,” the SBI report says. It further said that the RBI total rate cut during this easing cycle could ultimately reach 100 bps.

The Indian economy is poised to remain the fastest-growing major economy in FY26 by leveraging its stable macroeconomic fundamentals, robust financial sector and commitment towards sustainable growth, the report said.

India is expected to receive a good monsoon this year, which will help keep the prices of pulses, vegetables, and other food items stable. In addition, crude oil prices remain low, helping to keep inflation in check. As a result, experts estimate that by the end of the current fiscal year, the inflation rate could settle around 3.5%.

The SBI report also mentions that the Indian banking system will become stronger with the implementation of new policies. However, it warns of slow global economic growth. Despite global challenges, India’s economic position stays largely resilient, the report says.

With Media Inputs