The Reserve Bank of India (RBI) is likely to cut the repo rate by 25 basis points in its February 2025 policy meeting, which is set to begin on Wednesday, the State Bank of India (SBI) said in a research.

It said the rate cut would be at least 75 basis points over the entire easing cycle.

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SBI Research said that after an intervening gap in June 2025, the second round of rate cuts could begin in October 2025. It further said that the RBI Liquidity Framework needs to be revisited.

The report further said that the RBI could start using the Cash Reserve Ratio (CRR) as a regulatory intervention tool rather than just a liquidity management mechanism in the future.

The report emphasised the urgent need for the central bank to revisit its liquidity management framework, suggesting that CRR could serve as a countercyclical liquidity buffer rather than a frequent adjustment tool for daily liquidity needs.

Currently, the RBI manages liquidity through multiple measures such as Open Market Operations (OMO), the Cash Reserve Ratio (CRR), and the repo rate.

The SBI report argues that CRR should be used strategically to regulate liquidity based on broader financial conditions rather than immediate liquidity adjustments.

This will be the first MPC meeting for the new Governor, Sanjay Malhotra. Three new members will also be attending their first MPC meet.

In October last year, the Centre appointed three new members, namely Saugata Bhattacharya, Economist; Dr Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development; and Professor Ram Singh, Director, Delhi School of Economics, University of Delhi.