Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Friday that future rate cuts will depend on the outlook for inflation and growth, not just the current low CPI data. Speaking at the FE Modern BFSI Summit in Mumbai, he noted that monetary policy works with a lag and decisions are based on projections for up to 12 months.
The RBI has cut its key rates by 1 percentage point in 2025, with bank lending rates already reflecting a 0.5 per cent decline. Despite headline inflation falling to 2.1 per cent in June, Malhotra signalled caution, adding that CPI is projected to rise to 4.4 per cent in Q4.
He assured that recent rate cuts are aimed at boosting credit growth, which stood at 12.1 per cent in FY25, and dismissed concerns of asset bubbles. Malhotra highlighted that the RBI still has other tools beyond rate cuts to support growth.
The governor also spoke about reducing the cash reserve ratio (CRR) to 3 per cent, aimed at lowering intermediation costs and borrowing rates. Additionally, the RBI is simplifying its regulatory framework, consolidating 8,000 regulations into 33 master regulations and setting up a review cell to keep rules updated.
Malhotra reiterated concerns about industrial houses owning banks, citing conflicts of interest, and said payment infrastructure—currently subsidised—will eventually require funding from the state or users.