Rate Cuts To Begin From Second Or Third Quarter Of FY25, Says SBI Chairman

With the current inflation trajectory, the Reserve Bank of India will begin cutting rates during the second or third quarter of the next fiscal, according to SBI's Dinesh Khara.

The Monetary Policy Committee is clearly focused in terms of ensuring inflation below 4%, Khara, chairman of State Bank of India, told NDTV Profit.

With the kind of inflation trajectory we are seeing, there is a possibility that the rate cuts should start from the second or third quarter of the next financial year, he said. "But, much of it depends upon how the economy evolves over a period," Khara said.

The MPC's decisions on Friday were more in line with the expectation, and the interesting part was the inflation projection for FY24 at 5.4%, he said. "It's a very clear reflection that inflation trajectory is moving downwards."

The MPC decided to keep the benchmark repo rate unchanged at 6.5% for the sixth straight meet, as food inflation concerns persist while economic activity stays resilient.

On the system liquidity front, Khara said that the RBI has been actively managing liquidity by fine-tuning the repo operation, as per the need. The liquidity in the system will also depend on how the main budget is presented, and is also a function of the cash and bank balances of the Government of India with the RBI, Khara said.

RBI will ensure that there is enough liquidity in the system, so that the growth ambitions of the country is not constrained, Khara said.

The deposit rate is not expected to rise going ahead, the state-owned bank's chairman said. "The deposit rate has already played up, and if the inflation is expected to be soft, then I don't think it should go up."

Khara also said that he expects the credit growth to be around 14-15% for FY25, but it will depend on how the economy will evolve.