Will RBI raise interest rates at upcoming MPC meet? Here’s what SBI chief says

As the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) gets ready to deliberate on interest rates amid the continued geopolitical tensions, State Bank of India Chairman C.S. Setty feels a pause would help at this juncture.

“Broadly, the market expects that there could be a rate pause. At this juncture, growth, inflation, dynamics are more important. I think a pause will definitely help us to stabilise in terms of ensuring that smooth growth rates are achieved,” Setty said on the sidelines of an event on Wednesday.

The RBI MPC will begin its bi-monthly meeting today and a decision on rates will be announced on Friday. Over 2025, the MPC cut the benchmark repo rate from 6.5% to 5.25%. It is largely expected to keep rates unchanged as it assesses the impact of the ongoing conflict in West Asia, which has led to a surge in oil prices and disrupted supply chains. That has raised inflationary concerns as well as worries over a potential slowdown in growth.

Speaking with reporters on Wednesday, the SBI Chairman expressed hope that the asset management arm will be able to go public this year. 

MUST READ: RBI repo rate cuts at 125 bps: How home loan borrowers have already saved over ₹9 lakh - what lies ahead

SBI Funds Management filed its draft red herring prospectus with Securities and Exchange Board of India in March. This will be an offer for sale wherein existing investors will pare their stake in the country’s largest mutual fund. 

“We hope to do it sometime during this year, we are just waiting for the regulatory approval. We have already filed the DRHP,” he said. 

Setty pointed out that the global economic order was being rewritten in real time, supply chains were shifting, new growth centres were emerging and technology was redefining productivity. India, he said, was entering this period from a “position of strength” with a young population, rapidly expanding economy, world-class digital public infrastructure, modernising physical infrastructure, growing manufacturing capabilities, and a resilient financial system. 

While the journey towards 2047 will be “challenging,” it will be one of “most compelling growth stories of our time,” said Setty. 

In recent times, there has been a huge outflow of foreign institutional investments from India, chasing opportunities related to artificial intelligence, which India currently lacks.  Setty believes India will provide the largest use cases and highest adoption of AI and is going to be among the biggest beneficiaries in the world. 

MUST READ: India may cut bond taxes, ease investment rules to attract foreign capital: Report

While the services sector could be initially impacted by AI, the large number of engineering workforce in IT companies could be easily reskilled. “We need large number of skilled manpower to deploy the AI itself. This is something what we are really facing in the market now that while AI capital investments, everybody is ready for, the availability of the manpower to deploy these AI tools is actually becoming the challenge,” pointed out Setty. 

Despite the near-term uncertainties, he said one should look at India as a long-term growth story. “Our investment horizon for Indian equities or Indian investments has to be long. You have to be patient. The story of India is of demographic dividend and the entrepreneurship in India is immense,” he stressed. 

MUST READ: 'Fake, incorrect': Govt dismisses report of RBI selling $12 billion gold to save forex reserves