Financial services firm AnandRathi analysed the key points of the policy soon after it was announced.
SBI last reduced its lending rate in January by cutting it by 0.05 per cent.
Retail inflation crossed the RBI's comfort level and rose to 5.21 per cent in December on increase in prices of food items.
Currently, banks follow system of internal benchmarks, including Prime Lending Rate, Benchmark Prime Lending Rate, Base rate and Marginal Cost of Funds based Lending Rate.
Ahead of RBI's monetary policy review, SBI on Monday expressed hope the apex bank will cut interest rates by 0.5 per cent and CRR by up to one per cent to boost sagging growth.
Declining price of vegetables pulled down inflation to over three-year low of 5.96 per cent in March, core inflation moderated to 3.5 per cent and food price inflation also eased to 8.2 per cent, which is likely to prompt the RBI to consider a rate cut in its annual monetary policy next month.
After two rate hikes in less than six weeks aimed at curbing inflation, RBI Governor Raghuam Rajan on Wednesday said the central bank may be done with interest rate increases as their impact on the economy is assessed.
RBI Governor Raghuram Rajan asked banks to follow suit and pass on the rate cuts.
Debt funds typically held 0-5 per cent of their portfolio in cash and cash equivalents before this Sebi diktat.
Due to tight liquidity condition, RBI would cut cash reserve ratio.
After swinging 439 points during the day, the 30-share Sensex ended 141.33 points, or 0.38 per cent, lower at 37,531.98. It hit an intra-day low of 37,480.53 and a high of 37,919.47.
The Reserve Bank remains laser-focused to bring back retail inflation to 4 per cent over a period of time in a non-disruptive manner, Governor Shaktikanta Das stressed while voting for status quo in interest rates, as per minutes of the October policy meeting released on Friday. The central bank has been mandated by the government to ensure the Consumer Price Index (CPI) based inflation is at 4 per cent, with a band of 2 per cent on either side. The retail inflation, which was above 6 per cent during May and June, has started moving down and stood at 4.35 per cent in September.
Should deposit growth continue to outpace credit growth, banks may end up ceding some hard-earned 25-50 bps improvement in profitability or net interest margin gained in the past two years.
To neutralise this, RBI has been doing forward swaps
Reserve Bank's recent policy stance has earned for it praise as well as brickbats.
The SBI report ruled out a October rate hike
If this turns into reality, India's gross domestic product (GDP) growth will be the lowest since 2012-13, which could severely hit job creation and income growth in the near term.
