Overview
- SBI Research said on Friday that the balance of risks now favors a 25-basis-point repo rate increase before the RBI’s Oct 5–7 Monetary Policy Committee meeting.
- The research cited a broadening of consumer-price pressures, with CPI rising to 4.82% in August and forecasts that inflation could exceed 6.5% in October and November.
- SBI highlighted recent foreign portfolio investor selling of about $4.45 billion and a weaker rupee as fresh market stresses that strengthen the case for early tightening.
- The report warned that a weak 2026 monsoon and strong El Niño raise risks to rabi crops and food inflation, and it expects the RBI to lift FY27 GDP and inflation forecasts.
- Despite headline liquidity appearing ample after large forex inflows, regulatory rules limit banks’ usable deposits and create an estimated Rs 8.2 lakh crore deposit-creation gap that could constrain credit growth.