SBI Chairman CS Setty Anticipates 50 bps Repo Rate Hike in December 2026

State Bank of India Chairman CS Setty expects a 50 basis points hike in the repo rate during the Monetary Policy Committee's December 2026 meeting. He noted that while discretionary spending and consumer credit may moderate, productive credit demand from the real economy is expected to remain robust.

State Bank of India (SBI) Chairman CS Setty has stated that a 50 basis points (bps) hike in the repo rate is expected during the Monetary Policy Committee’s (MPC) December 2026 bi-monthly monetary policy review meeting. According to Setty, this expected increase will likely be followed by a pause lasting until the end of March 2027.

Speaking at a BFSI Summit organized by Business Standard, Setty addressed the broader economic implications of interest rate adjustments. The Reserve Bank of India's rate-setting panel previously raised the policy repo rate by 25 basis points—moving it from 5.25 per cent to 5.50 per cent—and shifted its monetary policy stance from neutral to calibrated tightening during its October 5–7 meeting. This adjustment came amid rising inflationary pressures alongside resilient economic growth.

Setty observed that while higher interest rates will influence the composition and quantum of credit demand, the effect will not necessarily be immediate. He distinguished between a weakening credit cycle and a moderation in credit demand, noting that rate-sensitive sectors, particularly discretionary spending-related borrowings, are likely to see some moderation.

However, Setty emphasized that the economy is entering this rate hike cycle backed by a robust growth rate and a projected 7.1 per cent growth rate. Consequently, sustained credit demand is expected from the real economy. While discretionary consumption credit will likely be impacted, productive activities are not expected to see a drop in credit demand.

Addressing deposit trends, Setty remarked that interest rates alone have limited capacity to draw customers into deposits. Instead, factors such as service quality and the overall value proposition for maintaining accounts are critical. He noted a structural shift in deposits, pointing out how easily funds move from savings accounts to fixed deposits due to the ease of doing business.

Setty also discussed the deployment of Foreign Currency Non-Resident (Bank) deposits. SBI mobilized over $10 billion via FCNR-B deposits under the RBI's special foreign currency swap window between June 8 and August 31, 2026. Within SBI's deposit universe of Rs 60 lakh crore, Setty stated that these deposits provide short-term liquidity, and their deployment is manageable rather than a major issue.

He added that the liquidity generated by FCNR (B) deposits can be absorbed by the banking system within two to three quarters. Combined with robust credit demand and RBI's liquidity absorption measures, Setty expressed confidence that the banking system does not need to worry about lending exuberance.

"As financial leaders navigate shifting macroeconomic conditions, the anticipated repo rate hike signals a deliberate move to manage inflation while sustaining growth. For businesses and entrepreneurs, this environment underscores the importance of strategic capital allocation. While discretionary consumer borrowing may see moderation, robust demand in productive sectors indicates that fundamentally sound businesses with strong cash flows will continue to find credit availability. Companies must focus on efficient working capital management and strong value propositions to navigate these evolving monetary cycles effectively." — Dr. Shishir Gupta, Founder & CEO, StartupLanes