New Delhi, September 4 (Daily Kiran) : The Reserve Bank of India (RBI) is projected to increase the repo rate to 6% by April 2027, driven by heightened liquidity in the market. This forecast comes from a report released on September 4, 2026.
According to Bandhan AMC, investors in India’s fixed income sector face a challenging environment due to rising inflation pressures. This situation calls for a faster normalization of policies, as the influx of foreign currency has significantly increased rupee liquidity, pushing overnight rates well below policy rates.
The report suggests that the pace of this normalization will depend on how quickly the RBI acts. It may involve recalibrating the overnight rate anchor to align with the policy rate, considering how to absorb excess liquidity in the medium term, and evaluating the speed of repo rate normalization in light of rising inflationary pressures.
Currently, there is limited scope for normalizing liquidity due to ongoing market disruptions. The report indicates that the market anticipates some temporary and permanent measures, including forex swaps, MSS bonds, OMO sales, and possibly an increase in the Cash Reserve Ratio (CRR).
Additionally, the report highlights a recent surge in energy prices due to renewed tensions in the Middle East, alongside widespread pressure on all commodities, including agricultural products. The monsoon has been inconsistent, GDP growth remains strong, and credit growth in India is approximately 18%.
The report concludes that both global and local conditions are pointing to increased inflationary pressures, even though current data has provided some relief to the RBI. Minutes from the last policy meeting revealed a more hawkish stance among MPC members, reflecting their growing vigilance amid rising global price pressures that may lead to discomfort with the current policy stance.
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