Mumbai (Maharashtra) [India], June 1 (ANI): The Reserve Bank of India (RBI) does not need to raise the repo rate in the upcoming monetary policy to manage pressure on the rupee, according to a report by SBI Research.

The report stated that it can instead use short-term interest rate tools and liquidity measures. It also argued against a repo rate hike even as global uncertainties and elevated crude oil prices continue to create pressure on currencies and financial markets.

'So should there be repo rate hike? NO!' the report said, while suggesting that the central bank should maintain a data-dependent approach and continue with its current policy stance.

The report cited the example of July 2013, when the RBI took steps to address exchange rate volatility by raising the Marginal Standing Facility (MSF) rate by 200 basis points to 10.25 per cent and recalibrating the policy corridor to 300 basis points above the repo rate of 7.25 per cent.

During that period, the reverse repo rate was kept unchanged at 6.25 per cent.

It stated 'Our call is along 'Hold the rates' with a data driven future dependency'.

SBI Research noted that wider interest rate corridors can increase interbank market activity while reducing dependence on central bank liquidity facilities.

The report also suggested that the RBI could use tools such as 'Operation Twist,' under which short-term rates can rise while long-term rates remain relatively lower.

According to the report, such measures can help address market pressures and support the rupee without affecting broader borrowing costs across the economy.

The report also said it expects India's real GDP growth for the fourth quarter of FY26 to be around 7.2 per cent, while full-year FY26 GDP growth is projected at 7.5 per cent.

For FY27, SBI Research has estimated GDP growth at 6.6 per cent.

However, the report cautioned that continued geopolitical uncertainties could affect the outlook and lead to revisions in growth estimates as more economic data becomes available.

According to SBI Research, targeted liquidity and interest rate tools remain a better option for managing currency pressures than a broad-based repo rate hike at the current stage.

The comments come ahead of the RBI's Monetary Policy Committee (MPC) meeting scheduled to begin on June 3. The six-member MPC will deliberate on interest rates and the economic outlook, while RBI Governor is set to announce the policy decision on June 5. (ANI)