2 hrs ago
SBI Economists Predict RBI’s First Rate Hike Amid Risks
SBI economists think India’s central bank may start raising interest rates soon.
They expect the repo rate to increase by at least 25 basis points.
A higher rate can make borrowing more expensive, but it may help control rising prices.
They also think the economy may grow faster than previously forecast.
The rupee has been losing value, and economists want safeguards against speculation.
They said this year’s monsoon was unusually weak in many areas.
Maharashtra declared drought conditions in 265 talukas, which could hurt farmers and crops.
The economists also said that banks may not have as much usable extra money as headline liquidity figures suggest.
SBI economists expect the RBI’s Monetary Policy Committee to raise the repo rate by at least 25 basis points, from 5.25% to 5.50%, at its October 5–7 meeting.
They forecast FY27 GDP growth rising from 6.7% to 7.0% and inflation increasing from 5.0% to 5.2%.
The economists cited broadening inflation, global risks, geopolitical tensions, crude-price concerns and changing liquidity conditions as reasons for pre-emptive action.
They warned that the rupee is under pressure from dollar strength, oil-company demand, foreign-bank buying and $4.45 billion in foreign portfolio outflows.
The report said weak monsoon conditions, drought in Maharashtra and regulatory constraints could affect crop output, liquidity and credit growth.
- Who
- The Reserve Bank of India’s Monetary Policy Committee and economists from the State Bank of India’s Economic Research Department.
- What
- The SBI economists expect a minimum 25-basis-point repo-rate increase and warned about inflation, rupee weakness, drought and liquidity constraints.
- Where
- India, including Maharashtra, where drought was declared across 265 talukas.
- When
- The expected policy decision is scheduled for October 5–7, 2026; the report was published October 2, 2026.
- Why
- The economists cited broadening inflation, global monetary tightening, geopolitical and crude-price risks, rupee pressure and changing liquidity conditions.
Key facts
- Expected repo rate
- 5.50%, up from 5.25%, after a projected 25-basis-point increase
- Policy meeting
- October 5–7, 2026
- FY27 GDP forecast
- 7.0%, revised up from 6.7%
- FY27 inflation forecast
- 5.2%, revised up from 5.0%
- August CPI inflation
- 4.82%, compared with 4.45% in July 2026
- Foreign portfolio outflows
- $4.45 billion since the previous Friday, according to the report
- Maharashtra drought
- Declared across 265 of the state’s 358 talukas on September 26, 2026
- 2026 monsoon
- 87% of the long-period average, described as the fourth driest since 2000
Quotes
SBI Economic Research Department economists
Economists in the State Bank of India’s Economic Research Department
“We estimate that to support an estimated 16 per cent credit growth for FY27 / loans create deposits, there will still be a gap of ₹8.2 lakh crore in deposit creation by banks because of regulatory dispensation, UPI & Sparsh (a cash management initiative for Centrally Sponsored schemes) requirements. Hence, going forward system liquidity will automatically adjust and there is no need for additional maneuvering”
thehindubusinessline.com
“Firstly, the global environment argues against waiting.... South Korea and the Philippines raised rates in August, followed by the US, Japan, euro area and New Zealand in September, amid renewed inflationary risks. With geopolitical tensions, crude-price risks and global repricing of risks, it would be prudent for us to rather act pre-emptively than being behind the curve.”
thehindubusinessline.com
Sources
Related news
RBI May Raise Rates as Inflation Risks Intensify
RBI Rate Hike Debate Intensifies as Inflation Risks Rise
RBI Governor Meets Sitharaman Amid Rate Hike Debate
Economists Expect RBI Rate Hikes as Inflation Breaches Tolerance Band
Morgan Stanley Sees RBI Rate Hikes Starting at October Meeting
Nomura Sees Two RBI Rate Hikes In 2026
Maharashtra TET Paper Leak: 18 Accused Sent To Judicial Custody
Palghar Lawyers Back Cockroach Janta Party, Offer Free Legal Aid
Maharashtra Farmers Sell Livestock as Drought Leaves Animals Thirsty
Election Commission Orders Drive for Voters Left Out After SIR
