Reserve Bank Governor Sanjay Malhotra on Wednesday expressed confidence that interest rates will remain low in the medium to long term, given the benign inflationary conditions. Addressing the media, in a post-monetary policy conference, Malhotra said the Indian economy is very strong, resilient and robust.
“We are in a neutral state...possibility either way, any ways cannot be ruled out that low rates (would) continue for a long time,” he said. Despite shocks, he said, the RBI is projecting a GDP growth of 6.9 per cent for the current financial year.
“Structurally, long-term, macroeconomic fundamentals, because of various measures which the government has taken, which the RBI has taken, which various institutions have taken, remain very strong and continue to drive growth on the one hand and at the same time keep price pressures contained. So, it's quite possible that even in the short to medium term, we will continue to have low rates,” said Malhotra.
Earlier in the day, the Reserve Bank of India kept its key policy rate unchanged, adopting a cautious wait-and-watch stance as policymakers assessed the impact of the six-week-long Iran conflict on energy supplies, inflation and growth. Malhotra also emphasised that the ceasefire has been taken into account in the monetary policy review. Inflation is estimated at 4.6 per cent for 2026-27, which is within the RBI's 2 per cent to 6 per cent target range, he said.
With regard to the transmission of a series of rate cuts by the RBI, Malhotra said banks have passed on about 90 basis points reduction on the lending side against 125 basis points moderation in repo rate. “Similarly, on the deposit side, it's more than 100. So, there has been a satisfactory transmission,” he said.
Asked about measures taken on currency market curbs, he said these steps were taken to check excessive volatility of the rupee, and these are not in any sense a structural change. “We stand committed to the development, broadening and deepening of these markets...obviously, these are not measures which are going to remain there forever,” he said. These measures were taken in view of heightened volatility in the forex market in the last few weeks of last month, he added.
Also read: RBI keeps repo rate unchanged
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