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India's credit ecosystem might be in for a major jolt of stimulus this week. According to the latest SBI Research report, the Reserve Bank of India (RBI) could go for a "jumbo rate cut" of 50 basis points during the upcoming June 2025 Monetary Policy Committee (MPC) meeting. This aggressive move, if enacted, would signal a strong attempt to revive credit growth and counterbalance mounting macroeconomic uncertainties.
The RBI has already trimmed the repo rate by 25 basis points each in February and April, bringing it down to 6%. In its last meeting, the central bank also pivoted from a 'neutral' stance to an 'accommodative' one, laying the groundwork for further easing.
But the SBI report suggests that now is the time to go further.
• Domestic liquidity concerns are easing
• Inflation appears to be staying within the RBI’s tolerance band
• Credit growth is visibly slowing, now down to 9.8% as of mid-May, compared to 19.5% a year ago
All of this points to the need for policy action that can kickstart demand, encourage lending, and inject confidence into an economy navigating global volatility.
Interestingly, even before the next cut, banks have been preparing. Several lenders have already reduced their external benchmark-linked lending rates (EBLR) by 50 basis points in line with the February and April cuts. Currently, about:
• 60.2% of loans are linked to EBLR
• 35.9% are tied to the Marginal Cost of Funds-based Lending Rate (MCLR)
This marks a significant shift in how rate cuts are translating to actual consumer and corporate lending conditions. What’s more, banks are repricing liabilities at a pace rarely seen in an easing cycle.
• Savings account interest rates have dropped to a floor of 2.7%
• Fixed deposit rates have been slashed by 30–70 basis points since February
Clearly, the transmission is real—and ongoing.
The SBI report also highlights that the liquidity gap between deposits and advances is narrowing, further justifying a bold policy stance.
• Core liquidity in the system is expected to be around ₹5.3 lakh crore by end-June
• Durable liquidity is projected to remain in surplus through FY26
Additionally, retail credit continues to dominate. As of March 2025, 47.8% of total credit was held by individual borrowers, up from 41.5% in March 2020. This indicates a healthy shift toward personal finance and consumption-driven lending.
On the inflation front, global pressures are easing, though at a slower-than-expected pace. In fact, some major economies like China are already experiencing negative inflation. Within India, inflation is well within the RBI’s comfort zone, creating room for monetary maneuvering.
The SBI report also noted IMF data projecting a 50 basis point GDP slowdown for India due to global protectionism and uncertainty, further bolstering the case for proactive policy.
• RBI may announce a 50-bps rate cut on June 6, based on signals from SBI Research
• Cumulative rate cuts for the current cycle could hit 100 basis points
• Banks have already started transmitting earlier cuts to both deposits and loans
• Liquidity is likely to remain in surplus, supporting lending growth
• Retail borrowers now hold nearly half of India’s total outstanding credit
If the RBI does move forward with this "jumbo" cut, it will be a strong vote of confidence in India’s macro stability—and a calculated gamble to reaccelerate the credit engine.
As deposit and lending rates adjust, both retail and corporate borrowers could benefit. But more importantly, the central bank may be setting a precedent: when uncertainty looms, bold action wins.
Stay tuned this Friday for what could be one of the most closely watched policy announcements of the year.
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