Will RBI pull the trigger or hold fire? Here’s what India’s largest public lender has to say

The dip in India’s GDP growth to 5.4% in the second quarter is “more of a blip,” says SBI Chairman Challa Sreenivasulu Setty, citing strong loan growth in agriculture, SME, and corporate sectors in the ongoing quarter. 

"We don’t have to live from one quarter to another,” he was quoted as saying in a Hindu Businessline report. 

In the third quarter, SBI, Setty said, saw a steady credit growth across key segments, even as personal loans have slowed. He noted that while the personal loan segment was witnessing a system-wide slowdown, there was "strong growth in agriculture, SME, and corporate loans".

As of September-end, SBI’s domestic loan portfolio stood at ₹33.33 lakh crore, with retail personal advances comprising 41.9%, followed by corporate loans at 34.7%, SME loans at 13.7%, and agriculture loans at 9.7%.

Setty expressed confidence in meeting SBI’s credit growth guidance of 14–16% for FY25, supported by the bank’s robust capitalization. 

While markets anticipate a rate cut, Setty is cautious about the Reserve Bank of India’s (RBI) next move. “The central bank remains concerned about inflation. We don’t expect a rate cut in December, but RBI may ensure sufficient liquidity through instruments like variable rate repos,” he said in the report. 

The Reserve Bank of India (RBI) began its three-day monetary policy review on Wednesday, December 4. While the repo rate is widely expected to remain unchanged at 6.5%, market watchers anticipate a possible reduction in the cash reserve ratio (CRR).

Calls for a CRR cut have intensified amid tight liquidity in the banking system and the slowdown in GDP growth. A CRR reduction, if announced, would signal the RBI's intent to ease monetary conditions without altering the repo rate.

Japanese investment bank Nomura is the only one who has broken ranks with its peers, forecasting that the RBI will cut rates by a full percentage point starting as early as this Friday, diverging from consensus estimates of a more modest 50-basis-point cut. 

Nomura has also revised its GDP forecast for FY25 downward to 6%, significantly below the consensus estimate of 6.9% and the RBI’s October projection of 7.2%. The bank cites slowing GDP growth, moderating credit expansion, softer inflation, and muted second-round effects as reasons the central bank should have already begun easing monetary policy. Despite this, Nomura remains optimistic about India’s medium-term prospects.