Several economists and bank executives forecast a quarter-point repo-rate rise, with one expecting action as early as October 7. The Reserve Bank of India has not announced a decision.
Bankers and economists expect the Reserve Bank of India (RBI) to raise its repo rate by 25 basis points this month, The Times of India reported. That would be the first increase since February 2023. It remains a market forecast, not an announced policy decision.
The RBI cut rates four times in 2025, taking the repo rate to 5.25%, the report says. It has since held off on tightening despite inflation risks linked to geopolitical tensions, higher oil prices and weaker farm output. State Bank of India chairman C.S. Setty said his bank sees the possibility of an increase but does not expect it to materially slow credit growth. He added that changes could show up sooner in bank lending rates than in the bond market.
Yes Bank chief economist Indranil Pan expects second-quarter inflation to exceed the RBI’s 4.7% forecast and approach 6% as higher input costs reach consumers. IndusInd Bank economist Gaurav Kapur put the probability of a 25-basis-point October increase at 90%, while Aastha Gudwani expects a move on October 7. Axis Capital economist Prateek Ancha sees a case for 50 basis points of tightening by year-end.
The analysts also expect the RBI to reduce surplus liquidity and bring overnight rates closer to its policy rate. Companies may compare bank loans with bond-market funding as relative borrowing costs change.