Sanjay Malhotra has made structural changes to banking regulation to bring down costs and increase efficiency. Plus, he kicked off a benign interest regime. But there are challenges ahead.
.jpg)
The truth is the government and the Reserve Bank enjoy a free, frank and cordial relationship.
The time frame for this is difficult to specify and much depends on stability in the foreign exchange markets, Prime Minister's key economic advisor C Rangarajan said.
A foreign brokerage warns that sustained crude oil prices above USD 100 per barrel could push India's inflation above the RBI's tolerance level, potentially triggering interest rate hikes.
The rupee appreciated 13 paise to close at 90.34 against the US dollar on Thursday, on trade deal optimism and overnight decline in commodity prices, even as the upside remained capped as investors look for more clarity on the India-US trade deal.
The RBI under new Governor Sanjay Malhotra on Friday cut interest rate for the first time in nearly five years as the central bank pivoted the policy stance to support a shuttering economy. The 25 basis points rate cut to 6.25 per cent comes after last rate reduction in May 2020. The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5 per cent.
The Indian banking system's net liquidity surplus has reached a four-year high of Rs 4.57 trillion, driven by maturing government securities, with further maturities expected to push the surplus to around 5 trillion.
Reserve Bank Governor Sanjay Malhotra on Friday said the central bank does not target any band for the rupee in the forex market, and allows the domestic currency to find its own correct level.
The policy will be presented in the backdrop of rising inflation.
While the economy will wait for a rate cut in December, the banking industry should be happy with the wave of liberalisation -- a big push for growth in bank credit, points out Tamal Bandyopadhyay.
Shrugging off concerns over the depreciation of rupee, the RBI has cut interest rate by 25 basis points to 5.25 per cent in a bid to further bolster economic growth, which rose to a six-quarter high of 8.2 per cent in the second quarter of the current financial year.
The Reserve Bank of India (RBI) on Wednesday kept its policy interest rate unchanged at 5.5 per cent for the second consecutive time, citing concerns over tariff uncertainties.
India's retail inflation, measured by the Consumer Price Index (CPI), increased to 3.48 per cent in April, up from 3.40 per cent in March, primarily due to a surge in prices of gold and silver jewellery, as well as certain kitchen staples like tomatoes and cauliflower.
'Economic activity appears to have peaked in the second quarter of FY26, with industrial output, exports, and business confidence all softening from October 2025.'
The RBI's bi-monthly policy review on June 3 will be the first after Prime Minister Narendra Modi assumed office on May 26.
Asked if the RBI will cut rates in its upcoming policy review, he said the central bank will definitely factor into account various developments and make an assessment of the macro economic conditions.
A revival in investment activity, which is key to stimulating growth, depends particularly on the recent policy announcements by the government being translated into effective actions, Subbarao said while announcing the second quarterly review of the monetary policy.
Benchmark indices Sensex and Nifty ended lower on Thursday, snapping a three-day rally, amid a weak trend in global stock markets.
Reserve Bank of India (RBI) Governor Sanjay Malhotra, and Deputy Governors Poonam Gupta, T Rabi Sankar, Swaminathan J, and S C Murmu on Friday addressed issues during the post-policy media interaction.
Remarks come at a time when he is under pressure from the govt to cut interest rates.
Fitch Ratings on Friday said persistently higher oil prices could cause India's retail inflation to rise faster than the expected gradual pace, and lead to a slowdown in economic growth in the first half of financial year 2026-27 (FY27).
Former Reserve Bank Governors do not seen any harm in central bank consulting the government before firming up monetary policy initiatives saying such an step would not amount to infringement on its independence.
Since February 2025, the RBI has reduced the policy rate by 100 basis points. In its previous policy review in June, it had trimmed the repo rate by 50 basis points to 5.5 per cent.
S Mahendra Dev, chairman of the Economic Advisory Council to the Prime Minister, expressed confidence that the rupee would stabilise around the 92-93 level against the US dollar, despite geopolitical tensions, and that foreign investment flows would return.
India's wholesale price inflation (WPI) increased for the fourth consecutive month in February, reaching 2.13 per cent, primarily due to rising prices of food and manufactured goods, according to government data.
'In the long run, India's strong growth story and reforms to make assets globally attractive will determine the rupee's resilience.'
For the time being, the RBI is done with the cuts. A cut in October, which many are still predicting, is not certain. Of course, if growth nosedives, the script will be different, expects Tamal Bandyopadhyay.
Indian stock markets experienced a significant rally following the announcement of a US-Iran ceasefire, coupled with a drop in crude oil prices. The Sensex and Nifty both closed nearly 4 per cent higher, mirroring gains in global markets.
Fitch Ratings on Thursday raised India's GDP growth forecast for the current fiscal to 7.4 per cent, from 6.9 per cent, on increased consumer spending and improved sentiment boosted by GST reforms.
The bank chiefs have also cancelled the customary media conference after the bi-annual policies.
Stock markets closed higher on Friday after the Reserve Bank of India kept its benchmark interest rate unchanged as expected and proposed allowing banks to lend to Real Estate Investment Trusts (REITs) with certain prudential safeguards to deepen the financing pool for the real estate sector.
The year 2022 saw the Reserve Bank of India (RBI) start acting on the policy repo rate after a gap of two years. The six-member monetary policy committee of the RBI reduced interest rate sharply - by 115 bps - when Covid-19 struck in 2020. In March 2020, days after the nationwide lockdown was announced, MPC in an unscheduled meeting reduced the repo rate by 75 bps, followed by another 40 bps in May. Status quo was maintained for the next two years since the May repo rate hike.
Inflation data, trading activity of foreign investors and global trends would dictate sentiment in the stock market this week, according to analysts.
India's wholesale price inflation surged to 3.88 per cent in March, marking the fifth consecutive monthly increase, primarily driven by a sharp rise in crude petroleum, natural gas, and manufactured items amidst the West Asia crisis.
Raghuram Rajan, who was Chief Economic Advisor in the Finance Ministry before taking over as RBI Governor on September 4, is scheduled to announce the next mid-quarter policy review on December 18.
'Given the lag in transmission, further softening of lending rates may happen in the coming months.'
Persisting uncertainties related to the US trade policies pose downside risk to the overall demand in the Indian economy while the inflation outlook for the near term has become more benign than anticipated earlier, RBI said in its latest bulletin on Thursday. In the August bulletin, the Reserve Bank of India (RBI) also said that India's sovereign rating upgrade by S&P bodes well for capital inflows and sovereign yields, going forward.
'Deposit and lending rates have started to fall considerably. It is likely to spur investment and consumption of durables.'
The Reserve Bank of India on Friday decided to keep the policy rate unchanged for the 11th time in a row but sharply lowered the GDP growth forecast to 6.6 per cent for the current fiscal, as against earlier projection of 7.2 per cent. The Reserve Bank of India (RBI) maintained the status quo on interest rate despite July-September quarter GDP growth falling to 7-quarter low of 5.4 per cent, as against its own projection of 7 per cent.
© 2026 Rediff.com - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances