MUMBAI: Reserve Bank of India (RBI) Governor Sanjay Malhotra assured markets that the central bank would ensure adequate liquidity to facilitate the smooth transmission of interest rates. In his first media interaction, he shared insights into his economic outlook and policy stance.
Optimism About Economic Growth
Malhotra expressed confidence in India’s economic trajectory, citing strong high-frequency indicators. He highlighted robust agricultural prospects, improving manufacturing activity reflected in the PMI, and a Nielsen survey indicating over 7% consumption growth as key drivers of optimism.
Balancing Growth and Inflation
Clarifying the RBI’s priorities, Malhotra emphasized that unlike central banks with a dual mandate, the RBI Act prioritizes inflation control and price stability while keeping economic growth in consideration. He noted that with inflation easing, the RBI has room to support growth while maintaining a neutral stance to respond proactively to economic changes.
Inflation Within Tolerance Band
Malhotra underscored that while some may settle for inflation merely staying within the 2-6% tolerance band, the RBI aims for comprehensive macroeconomic stability.
Disciplining Banks Through Cease-and-Desist Norms
Addressing the central bank’s use of cease-and-desist orders against banks, Malhotra stated that such actions are taken only after thorough deliberation and when compliance measures fail. He reiterated that these steps serve the public interest and are employed as a last resort.
Rate Transmission and MCLR Adjustments
He assured that changes in interest rates would not impact existing deposit holders but would apply to new deposits. For loans linked to the Marginal Cost of Funds-Based Lending Rate (MCLR), he noted that revisions occur on a six-month cycle, with adjustments likely by June.
Personal Loan Growth Moderation
Malhotra stated that the RBI is satisfied with the current moderation in personal loan growth and does not foresee the need for further tightening in this segment.
