New Delhi, Jun 5 (KNN) Global trade tensions and tariff-related uncertainties could constrain the extent of repo rate reductions by the Reserve Bank of India during the current financial year, according to Karthik Srinivasan, Senior Vice President and Group Head, Financial Sector Ratings, ICRA. The rating agency executive emphasised that while domestic economic factors remain the primary consideration for monetary policy decisions, international developments cannot be entirely disregarded. Srinivasan indicated that the central bank's policy deliberations would largely depend on domestic economic conditions, though global tariff disputes and their potential ramifications require careful consideration. He noted that monsoon patterns could also influence the apex bank's interest rate decisions, adding another variable to the monetary policy equation. ICRA anticipates a 25-basis point reduction in the repo rate when the Monetary Policy Committee announces its decision on Friday. The rating agency maintains an internal projection of a 75-basis point rate cut following the April policy adjustment. The Reserve Bank has implemented a cumulative 50-basis point reduction in the repo rate since February. Srinivasan suggested that ongoing global uncertainties and trade tensions create additional justification for maintaining accommodative monetary conditions to support domestic consumption and business activity. The transmission of policy rate changes to the broader economy has shown improvement over recent years, though banks face constraints in reducing deposit rates due to persistent deposit mobilisation challenges. Financial institutions must navigate the strategic decision between protecting profit margins and accepting margin compression, as meaningful reductions in deposit rates remain difficult to implement given competitive pressures for customer deposits. Regarding geopolitical tensions and their impact on the banking sector, Srinivasan identified potential vulnerabilities in select export-oriented industries that warrant monitoring. However, he noted that tariffs imposed on Indian exports appear relatively lower compared to those affecting other competing nations, potentially positioning India advantageously in global trade dynamics.