Latest news with #SBIResearch
Time of India
16 hours ago
- Business
- Time of India
RBI MPC meet: Fixed deposit rates set to fall after repo rate cut; what should FD investors do now?
NEW DELHI: The Reserve Bank of India (RBI) on Friday slashed the repo rate by 50 basis points to 5.5%, marking its third rate cut this year. Alongside, the Cash Reserve Ratio (CRR) has also been reduced by 1% to 3%, injecting Rs 2.5 lakh crore into the banking system. Tired of too many ads? go ad free now While this move brings relief for borrowers—home, auto, and other loans are expected to get cheaper soon—it spells concern for fixed deposit (FD) investors. As banks begin to transmit the repo rate cut, FD interest rates are likely to decline further in the coming months. What is the repo rate? The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to banks for short-term needs. When the repo rate is lowered, banks can borrow funds at a cheaper rate. This often leads to lower fixed deposit (FD) interest rates for customers. Why FD rates are falling After two earlier cuts of 25 basis points each in February and April, the latest move has prompted banks to cut FD rates even more aggressively. "FD rates have been reduced in the range of 30-70 bps since February 2025," according to an SBI Research. Although FD rates aren't directly linked to the repo rate, they are influenced by it through changes in the marginal cost of lending (MCLR), which banks use to determine interest rates. What should FD investors do now? 1. Lock in current FD rates: FD rates are still relatively attractive at several banks, with some Small Finance Banks offering 8% or more. Investors should consider locking in these higher rates now before banks revise them downwards. To stay safe, choose banks covered under the ₹5 lakh deposit insurance limit. 2. Opt for medium to long-term FDs: Since short-term FD rates may fall sooner, longer-term deposits can help lock in higher returns for a longer duration, especially as interest rates are expected to remain low in the near future. Tired of too many ads? go ad free now 3. Explore corporate FDs with caution: If you're willing to take on some risk for higher returns, corporate FDs may be an option. They typically offer better rates than traditional bank FDs, but they also come with higher risk, so review the company's credit rating and financial health before investing.
New Indian Express
17 hours ago
- Business
- New Indian Express
RBI opens happy hour window, borrowers can pack themselves a picnic basket
It's a big week for interest rates with the RBI trailblazing a rate cut bonanza on Friday. The benchmark repo rate is reduced by a larger-than-expected 50 bps with immediate effect, while the cash reserve ratio (CRR) will be reduced by 100 bps in four equal tranches by November. This is the third consecutive rate cut and the benchmark repo rate now stands at a 6-year-low of 5.5%. With 100 bps rate cuts coming in quick succession, the RBI also decided to change the policy stance to accommodative from neutral. In other words, the rate cut kindness party has well and truly begun and as RBI officially opens its happy hour window keeping the path for rates downwards, analysts expect the repo rate to settle at 5%-5.25% or even lower this fiscal. It also means, borrowers can pack themselves a picnic basket as interest rates on fresh home loans are set to fall lower than 7.5% over the coming weeks. India Inc too can spread a thick layer of jam and kickstart the much-awaited capex cycle. It's true that money is important to revive credit growth, but perhaps Governor Sanjay Malhotra believes that a lot of money is important. So he crushed the CRR, or the money banks need to set aside as liquid cash, to 3% from 4%, releasing primary liquidity of as much as Rs 2.5 lakh crore. This is expected to do multiple things at once. It'll reduce the cost of funding, improve monetary policy transmission, provide cheap credit to industry and above all stimulate consumption and investment. In short, RBI has finally emerged victorious seizing the inflation monster by the throat and has now turned its single-minded focus towards growth, though Malhotra reasoned that he wasn't favouring one over the other. Few expected RBI to brake this harder on policy rate cuts. While SBI Research was an outlier giving out a rare prediction of 50 bps reduction to revive the credit cycle and stimulate growth, others argued that a super sized rate cut may be seen as a underlying symbol of tough times and set off inflationary expectations, which are harder to manage than inflation itself. But Malhotra stressed that inflation expectations have moderated and will continue to moderate. And putting a cherry on the picnic cake, he revised FY26 inflation forecasts downwards to 3.7% from 4% projected in April. Q1 estimates are pegged at 2.9% lower than 3.6% estimated earlier, followed by Q2 at 3.4% (3.9% earlier), Q3 at 3.9% (from 3.8%) and Q4 at 4.4%. While the inflation monster has retreated back to the barn, RBI is well aware that the devil can be a liar. Moreover, as Malhotra noted, globally the last mile of disinflation is getting a little more protracted and so central banks remain extremely cautious. Back home though, we are witnessing broad-based moderation in price rise and the above normal-monsoon is expected to rein in food price pressures in the coming quarters. As for growth, although consensus estimates project India's FY26 real GDP at about 6.2%, RBI retained its previous forecast of 6.5%. But given the potential downside risks from geopolitical tensions and trade policy uncertainties, it revised the quarterly growth projections with Q1 set at 6.5%, Q2 at 6.7%, Q3 at 6.6% and Q4 at 6.3%. Meanwhile, transmission remains uneven with big banks like SBI yet to pass on the February and April rate cuts to borrowers. Analysts expect the rate transmission to gain momentum and with Friday's cut, home loan rates are expected to fall below 7.5%. External economic pressures like trade policies and others would require continued RBI's accommodative stance and policy support for the Indian industry to sustain the growth. Besides, subdued manufacturing growth, uneven consumption demand, a delayed recovery in private capital expenditure and weak exports need attention.
Mint
2 days ago
- Business
- Mint
As RBI is set to cut repo rate for the third time in a row, will your home loan EMI fall as well?
The Reserve Bank of India's (RBI) monetary policy committee (MPC) is expected to cut repo rate on Friday after the conclusion of a 3-day policy meeting. This is likely to further reduce your home loan EMI once the banks pass on the benefit of rate cut to their consumers. Notably, RBI cut repo rate by 25 basis points to 6.25 percent on February 7 after a gap of nearly five years. The maiden rate cut of 2025 was followed by another rate cut on April 9 – also of 25 basis points. Now, if the MPC proceeds with a rate cut the third time, the repo rate will become lower than 6 percent. So, it appears that the rate cut cycle, which kicked off early this year is expected to continue for some more time. There is no denying the fact that this will lead to lower interest rates for borrowers on their home loans, but will it mean lower interest rates on personal loans as well? Repo rate is a rate of interest which banks are meant to pay to the RBI when they borrow against government securities. So, when banks manage to get loans at a cheaper interest, they can afford to lend further at lower rates as well. There is no rule of thumb which says that the banks need to cut repo rate in the same proportion in which RBI cuts the repo rate. However, a number of banks cut their lending rates after the previous rate cuts. For instance, State Bank of India (SBI), Bank of Maharashtra, Indian Bank and Punjab National Bank cut their lending rates in April. UCO Bank and Bank of India also reduced their lending rates in the wake of rate cut in April. At this stage, there are only predictions and expectations which are swirling around. SBI Research report has predicted a higher rate cut of 50 basis points. The report has attributed this to receding domestic liquidity and financial stability concerns in the Indian economy. 'Domestic liquidity and financial stability concerns have receded. Inflation is expected to stay within the tolerance band,' said the analysts at SBI Research in its report. Only those loans stand to get affected, which follow a variable interest rate. These include home loans and car loans. Since personal loans are disbursed at a fixed rate of interest, they will not see any fall in their interest rates. However, there could be some change in the interest rates of future personal loans. For all personal finance updates, click here
The Hindu
2 days ago
- Business
- The Hindu
Watch: India Q4 GDP growth: Higher than expected? What helped?
The Indian economy threw a surprise by growing mildly faster than expected by analysts in the 3 months ended March 2025. What helped the economy do this? And should we really cheer ourselves hoarse on India within striking distance of Japan in GDP numbers? Last week, the government said the Indian economy grew 7.4% for the quarter ended March 2025 – a rate that exceeded some expectations. A few days prior, four agencies – SBI Research, Morgan Stanley, Nomura and Barclays had estimated growth to be anywhere between 6.4 and 7.2%. The final figures showed full-year growth for FY25 at 6.5% far slower than the robust 9.4% seen the previous year. December last, the RBI had projected a slightly lower growth estimate of 7.2% for the final quarter. SBI Research points out that a sharp increase in indirect taxes helped nudge GDP growth figures upwards. In January, gross GST revenue rose 12.3%. February collections clocked 9.1% growth while March saw the numbers surge 9.9%. Let's now see which key sectors either spurred or dragged down growth. Script & Presentation: K. Bharat Kumar Production: Shibu Narayan
Mint
4 days ago
- Business
- Mint
RBI likely to carry out ‘jumbo' rate cut to boost India's credit cycle: SBI Research
The Reserve Bank of India (RBI) is expected to cut its key benchmark interest rates by 50 basis points in its upcoming June 2025 monetary policy committee (MPC) meeting, according to an SBI Research report released on Monday, 2 June 2025. 'We expect a 50-basis point rate cut in June'25 policy as a large rate cut could reinvigorate a credit cycle,' said the research agency in its latest report. 'Cumulative rate cut over the cycle could be 100 basis points,' they said. RBI is scheduled to hold its bi-monthly meeting starting Wednesday, 4 June 2025, and Governor Sanjay Malhotra will announce the MPC results on Friday, 6 June 2025. RBI, in its first policy meeting for the 2025-26 fiscal year, announced a 25-basis-point rate cut for the second consecutive time to its current level of 6 per cent and shifted its stance from 'Neutral' to 'Accommodative'. The research agency attributed its stance of a 'jumbo rate cut' to the receding domestic liquidity and financial stability concerns in the Indian economy. SBI Research suggested that the main focus of the upcoming policy should be keeping the domestic growth momentum intact. 'Domestic liquidity and financial stability concerns have receded. Inflation is expected to stay within tolerance band. Keeping the domestic growth momentum intact should be the main policy focus and provides the justification of a jumbo rate cut,' said the analysts at SBI Research in its report. India's credit growth is witnessing a slowdown to 9.8 per cent levels as of 16 May 2025, which is narrowing the gaps between the deposits and the advances in the economy, favouring the impact from liquidity, according to the research report. 'Slowdown in credit growth, to 9.8% as on May 16, 2025 and narrowing gap between deposits and advances have favorably impacted liquidity,' noted SBI Research. The agency expects core liquidity in the economy to be ₹ 5.3 lakh crore by the end of June 2025. 'Durable liquidity is likely to remain surplus in FY26,' they said. The report also said that the share of individuals in total credit maintained its rising momentum, at 47.8 per cent in March 2025, compared to 41.5 per cent in March 2020. This means more of the loans given out by the banks or other financial institutions are going to direct individual borrowers, rather than businesses or corporations. 'RBI is expected to revisit the liquidity framework in the current year,' said SBI Research in its report. IMF data suggests that India's GDP is expected to slow by 50 basis points due to rising protectionism and uncertainty. The downward economic projection applies to all major economies, as per the report. On the inflation front, the agency expects global headline inflation to decline at a slower-than-expected pace. 'Inflation in emerging economy is expected to moderate with latest reading for China suggesting negative inflation,' said the analysts in the report.
