Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said future rate cuts to the central bank’s repo rate will be based on inflation and growth projections and not short-term CPI data. Speaking at the Financial Express Banking and Finance Summit, he signalled a cautious approach ahead of the August 6 policy review.
“Inflation may have eased, but the war isn’t over,” Malhotra said, adding that the Monetary Policy Committee (MPC) looks up to a year ahead when making decisions. Though CPI dropped to 2.1 per cent, it’s expected to rise to 4.4 per cent in Q4, with a downward revision likely.
The RBI has cut rates by 1 percentage point this year, with full transmission reflected in lending rates. Credit growth is expected to reach 12.1 per cent in FY25, but currently stands at 9 per cent for FY26.
Malhotra assured that further rate cuts won’t trigger asset bubbles and said the RBI still has tools to support growth. The recent cash reserve ratio (CRR) cut to 3 per cent is aimed at reducing borrowing costs.
He also outlined efforts to simplify regulations, with plans to reduce over 8,000 rules into 33 master frameworks. A review cell will reassess policies every 5–7 years.
On banking reforms, Malhotra raised concerns about industrial houses owning banks due to conflict-of-interest risks. He also highlighted the RBI’s financial inclusion drive, with officials visiting 2.7 lakh panchayats for re-KYC and outreach.
Defending bank boards amid recent controversies, he said they should remain vigilant but can’t be blamed for all lapses.
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Malhotra added that while digital payments are currently subsidised, future costs may need to be shared by users or the state.
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