RBI could cut repo rate: StanChart India CEO P.D. Singh

The Reserve Bank of India (RBI) is likely to cut its policy repo rate in the upcoming monetary policy review, and that could well be the last in the current cycle, according to P.D. Singh, CEO, India & South Asia, Standard Chartered Bank. “Maybe one cut may come through, and that could be the last, but again it depends on inflation,” Singh told Fortune India at a media interaction.

Singh also pointed out that India’s retail inflation rate of 2.1% was unusually low compared to the U.S.'s rate of 2.7%. “I’ve never seen such numbers before. So, unless something happens to food prices, and month-on-month inflation shoots up, I think you’ll have more room for cuts,” Singh said.

On liquidity pressure in the banking system, Singh attributed it to cyclical factors. “We see it happen every year. I would still attribute it to the same factors—tax payments and system liquidity outflow. The RBI has injected more liquidity into the system,” he said, noting that despite a record decadal high FPI outflow, there were no structural shifts impacting liquidity in the system.

In fact, SBI Research in its latest report has also called for a 25-bps cut, arguing that inflation is likely to remain benign even in FY27. The central bank had already lowered the rates by 100 basis points this calendar year before pausing in August. Retail inflation based on the CPI had eased to 2.07% in August before hitting an eight-year low of 1.61% in July.

A Reuters poll conducted between September 19 and 24, however, shows that a majority of economists (45 of 61) expect the central bank to maintain the status quo at its meeting. But the remainder (16 economists) predicted a 25-basis-point cut.

Globally, too, policymakers are in a monetary easing mode. The U.S. Federal Reserve cut rates by 25 bps to 4-4.25% in September after an extended pause, reflecting concerns over slowing growth.

Global brokerage BofA Securities said the central bank is expected to prioritise financial stability and exchange rate management, even as it acknowledges downside risks to growth. The central bank is likely to meet its 6.5% GDP growth target while undershooting its 3.7% inflation projection. “This essentially implies that the RBI can either stand pat or consider a modest 25-basis-point cut, without being too provocative, while retaining its neutral stance,” the brokerage commented.