RBI MPC Meeting August: RBI May Announce 25 bps Repo Rate Cut to Boost Diwali Spending, What SBI Predicts?

The Reserve Bank of India (RBI) is likely to announce another cut in the key repo rate during its Monetary Policy Committee (MPC) meeting on Wednesday, August 6, as it aims to boost credit demand ahead of India's festive season. With Diwali falling earlier this year, analysts believe the central bank may be compelled to further ease monetary policy to stimulate consumer spending.

RBI MPC Meeting August 2025: Will RBI Announce Another Repo Rate Cut?

Over the past three bi-monthly MPC meetings in 2025, the RBI has already reduced the repo rate by 100 basis points (1%) from 6.5% in February to 5.5% in June. A major 50 bps cut came during the June meeting. Alongside this, the RBI shifted its policy stance from 'accommodative' to 'neutral', signalling a move toward a more balanced approach between growth and inflation.

Diwali Fever To Impact RBI Repo Rate Stance

Ahead of the August 6 announcement, SBI Research has suggested that the RBI could frontload another 25-basis-point cut, aligning with the upcoming Diwali season to support festive consumption.

"We have analyzed past trends of credit growth around Diwali period with respect to repo rate cut. We found that any repo rate cut ahead of Diwali boosts credit growth more vigorously till Diwali," said the SBI Research report titled 'Prelude to MPC Meeting: August 4-6, 2025'.

The report cited an example from 2017 when a 25-bps rate cut in August led to an incremental credit growth of Rs 1,956 billion by the end of the Diwali period. "For example, a 25-bps repo rate cut in Aug'17 resulted in an incremental credit growth of Rs 1,956 billion till the ending of Diwali, of which almost 30% in personal loans," the report noted.

Since February this year, the RBI's cumulative repo rate cuts have contributed to a fall in external benchmark-linked home loan rates by approximately 1%, encouraging banks to push credit growth further.

"RBI has slashed repo rate by 100 bps in last months (since Feb'25) and the home loan rate linked to EBLR has also declined by the same magnitude. This we believe has given fillip to the home loan portfolios of banks," SBI added.

RBI Monetary Policy Decision: Can Festive Sentiment Drive Borrowing Further?

Experts believe that a Diwali-focused rate cut could further stimulate consumer borrowing, particularly in housing, personal loans, and durable goods, which typically see a spike in demand during the festive months.

"RBI may announce a 25 basis points repo rate cut in its monetary policy. This is likely to be because of the focus on the upcoming festival season. The past data show a clear trend that any repo rate cut ahead of Diwali results in higher credit growth during the festive period. This step will provide liquidity to the markets, and the market may take support from it," said Anuj Gupta, a market expert.

Inflation has remained well within RBI's tolerance band in recent months, reducing the need for a restrictive stance. The SBI report warns that delaying policy easing could hurt economic momentum, especially when consumer confidence and credit appetite are rising.
It argues that central banks must strike a balance between price stability and output growth-and with festive demand kicking in, the timing may be ideal for a supportive monetary policy push.