New Delhi, Sep 25 The Reserve Bank of India's monetary policy committee (MPC) is anticipated to maintain the status quo on the repo rate in its October review, considering the positive impact of GST reforms on demand, stronger-than-expected Q1 FY26 GDP growth, and an inflation trajectory which is expected to slope upwards thereafter, a report said on Thursday.
The inflation trajectory remained lower due to GST rationalisation (FY2026 average now around 2.6 per cent).
The transmission of the past 100 bps rate cut is assessed as nearly complete for fresh deposits (-94 bps) but muted for outstanding deposits (-18 bps), ICRA said in its report.
Similarly, the Weighted Average Lending Rate for fresh loans declined by 60 bps, compared to a 42-bps easing for outstanding loans.
Further significant transmission to lending rates is considered limited in the coming months.
According to the report, the 10-year G-sec yield for the government bond market is projected to trade between 6.40-6.60 per cent, with the yield curve expected to remain steep.
This is due to comfortable liquidity keeping short-term rates steady, while long-term yields remain sticky amid fiscal concerns and demand-supply dynamics.
"Internationally, the spread between the 10Y India G-sec and the 10Y US Treasury yield widened to 236 bps in September 2025 from 209 bps at the end of June 2025, following a US Fed rate cut," the report said.
Systemic liquidity surplus cooled in September 2025 after being sizable in June-August 2025, due to advance tax outflows.
Additionally, a pending 75 bps CRR cut during October-November 2025 and G-sec redemptions (Rs. 1.0 trillion) in early-November 2025 are expected to support liquidity, offsetting festive season currency leakage pressure, the report stated.
The RBI may continue Variable Rate Repos (VRRs) to manage intermittent tightness.
According to the report, GST rationalisation is expected to dampen headline CPI inflation by 25-50 bps during Q3 FY2026-Q2 FY2027 relative to earlier estimates
"Average CPI inflation for FY2026 is now projected at around 2.6 per cent (against 3.0 per cent earlier)," the report noted.
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