Will the RBI Cut Repo Rate in 2026? Here’s What HDFC, Kotak, and SBI Say

Synopsis: Institutional commentary suggests repo rate cuts are unlikely in the next two months. Most analysts expect a prolonged pause, with liquidity management replacing rate action. While none directly hinted at easing, some flagged yield pressures, reinforcing the view that the current rate stance is likely to remain unchanged.

After the latest monetary policy announcement, markets are closely assessing whether the Reserve Bank of India is nearing the end of its rate cycle. With global bond yields firming and domestic borrowing requirements remaining elevated, economists and market participants are debating the path ahead for repo rates.

Leading institutions, including HDFC Asset Management Company, Deutsche Bank, and Kotak Mahindra Bank, have shared their views, largely signalling caution and a prolonged pause rather than imminent easing.

What are the various banks’ opinions on the policy? 

Shobhit Mehrotra, head of HDFC AMC fixed income, seems to be of the view that the rate-cut cycle is now over for the time being. He does see a very long pause, where RBI would step in through liquidity rather than rate actions. With a massive borrowing programme in place for FY27, amounting to over Rs 17 lakh crore along with SDLs, bond yields would be under pressure, as he also does not indicate any further repo rate action and even indicates that the markets would realise that “further cuts are far away, if any”. 

Kaushik Das, chief economist of Deutsche Bank, says that the policy has been balanced and appropriate. He believes the RBI’s decision to hold rates is correct and that the increase in bond yields reflects global trends rather than domestic conditions. He has highlighted that liquidity management – if the RBI allows surplus liquidity to remain in the system, it will be positive for short-term rates and bonds. However, he has not mentioned anything about rate reductions; rather, he has signalled comfort with the current stance and that they are waiting and watching.

Upasna Bhardwaj, chief economist of Kotak Mahindra Bank, is the most direct. She says, “We are done with the rate-cutting cycle” and expects a long pause unless there is a “dramatic change” in the data from the new GDP/CPI series. This is, of course, effectively saying there will not be repo rate cuts.

Ashwini Tewari is more focused on growth, liquidity management, and banking reforms rather than rates. He actually emphasises the fact that RBI will be dynamic in liquidity rather than indicating repo rate cuts are around the corner.

Ashhish Vaidya sees liquidity remaining comfortable, though he does not expect any aggressive OMOs unless currency pressures rise. He is actually seeing the 10-year bond rising to 6.95%. There is zero probability of a rate cut, quite the opposite – a bearish outlook for fixed income rates globally.

Will RBI Cut Repo Rates in the Next Two Months?

As per all the institutional analysis, the chances of the repo rate being cut in the next two months are very low. None of these institutions has indicated any repo rate cuts in their analysis. In fact, Kotak Mahindra Bank has already indicated that they think the rate-cutting cycle is over now. This is also supported by HDFC AMC, which has indicated that the rate cuts are “far away, if any.” All these signs are pointing towards an increase in the interest rate, and, on the positive side, at least it will be stable, and this scenario is going to remain in place for some time to come.

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