Participants from the Reserve Bank of India:
Shri Sanjay Malhotra - Governor, Reserve Bank of India
Shri Swaminathan J - Deputy Governor, Reserve Bank of India
Dr. Poonam Gupta - Deputy Governor, Reserve Bank of India
Shri Shirish Chandra Murmu - Deputy Governor, Reserve Bank of India
Shri Rohit Jain - Deputy Governor, Reserve Bank of India
Shri Sanjay Kumar Hansda - Executive Director, Reserve Bank of India
Shri Indranil Bhattacharyya - Executive Director, Reserve Bank of India
Shri Ravi Shankar - Executive Director, Reserve Bank of India Moderator:
Shri Brij Raj - Chief General Manager, Reserve Bank of India Brij Raj:
Good afternoon, everyone. Welcome to this post-policy press conference, fourth for the financial year 2026-27. We have with us Governor, Reserve Bank of India, Shri Sanjay Malhotra; along with Deputy Governors, Shri Swaminathan J; Dr. Poonam Gupta; Shri Shirish Chandra Murmu; and Shri Rohit Jain. We also have with us Executive Directors, Shri Sanjay Kumar Hansda; Shri Indranil Bhattacharyya; and Shri Ravi Shankar. I also welcome my other colleagues from the Reserve Bank. Sir, there are 26 participants from the media. Before we begin, we have two housekeeping announcements. First, I request the media participants to please stick to only one question. I repeat, one question only, so that everyone gets a chance. Second, please switch on the mic while speaking so that those watching the live telecast are able to hear clearly. Once you have finished speaking, please switch off the mic. Sir, with your permission, I will now call out the names. Sanjay Malhotra:
Yes, let's begin. Brij Raj:
Thank you, Sir. I will request Ms. Latha Venkatesh from CNBC TV18 to please ask the first question. Latha, please. Latha Venkatesh, CNBC TV18:
Thank you very much. Thank you Governor and RBI. Sir, you in your speech, pointed out that the next three quarters, the inflation average is 5.8%. Now, that means it is still a very loose policy in terms of real rate. Did you all contemplate a 50-basis hike at all? Going by the minutes of the previous MPC meeting, you said that you will recalibrate policy as inflation normalizes. Should we expect the recalibration of real rate also in the policies to come? Sanjay Malhotra:
So, there are two parts to the same question, right? One is that did you consider a 50-basis point rate hike? So, we discuss all possibilities and thereafter take a view as to what will be the appropriate monetary policy decision. As regard to the real rate, obviously, a recalibration thereof, even a 25-basis points hike recalibrates the rate. Whether more, I suppose your question is whether more is required or not required, that is a call that will be taken. As we have said, going forward, it will be up to the MPC to take a view on how it looks forward. But obviously, we have clarified by changing the stance that there is no rate cut in the near term. What we are contemplating is either a pause or a rate hike. How deep the rate hike or shallow the rate hike will be, will depend on the evolving macroeconomic conditions and the growth-inflation dynamics. Referring to headline alone, as we have been mentioning, while headline is our target as given to us by the Government, and we continue to focus on trying to bring headline to the target of 4%, but that is not the only thing to be seen. As we have said, the underlying inflation, the path where it is going, because especially in these times when a lot of the increase in headline inflation is because of, one, base effect, and other supply-side factors. So, headline alone may not be the right measure, and so we have to look at other measures which we have given, including core, diffusion indices, etc., so as to be able to get a view, so as to be able to infer as to what the underlying inflation is and where it is moving to. Brij Raj:
Thank you, Sir. Sir, we will take some more questions from our left side before we come to this side. I will now request Manojit Saha from Business Standard to ask his question. Manojit, please. Manojit Saha, Business Standard:
Thank you, sir. Credit growth has been very strong. It's almost 19% rate. With this rate hike and, of course, as you said that going ahead, there will be no rate cut, either it will be a pause or rate hike, so interest rates will harden overall, generally. Do you expect credit growth to kind of taper down, slow down a bit from here? And if you can also tell us about your assessment of the liquidity condition because core liquidity is still ₹10 trillion, I think. Sanjay Malhotra:
I will answer one question. Manojit Saha:
Okay. Sanjay Malhotra:
And I will answer your second question in case others do not ask the same question. I am sure it will come up. Your first question on credit growth - as I mentioned even earlier, in the last press conference, it has been at all-time highs, I think, in the past, the data that we have, 19% growth rate is amongst the highest. And it is because of a number of reasons. Will it moderate going forward? I think it will continue to be strong. A few percentage points here and there should not really matter too much in the overall scheme of things, but it will continue to support. It will be strong and continue to support growth. Manojit Saha:
Thank you. Brij Raj:
Thank you, Sir. I will request Anup Roy from Bloomberg to ask his question. Anup, please. Anup Roy, Bloomberg:
Thank you, sir. Sir, you mentioned about the global factors today in your statement. Now, how much the global factors like US Fed policy, etc., are weighing on RBI policy decision now? Or is it still very much focused on domestic factors? Sanjay Malhotra:
No, primarily, our policy decisions are based on the domestic growth and inflation and macroeconomic conditions and outlook. But this does not certainly mean that external forces, conditions, do not matter. They do matter. They do impact our growth, inflation, and our interest rates, as I mentioned in an earlier interview. And they are discussed, as has also been noted in the minutes, always. So, they are taken into consideration in our monetary policy decisions. Brij Raj:
Thank you, Sir. I will request Hamsini Karthik from Moneycontrol to ask her question. Hamsini, please. Hamsini Karthik, Moneycontrol:
Thank you. Good afternoon, everyone. Sir, my question is about the liquidity available in the system at the moment. Every time there has been a flush of liquidity in the system, NBFCs have been the biggest beneficiaries of credit. What this has invariably led to is a little bit of an asset quality issue. Now on one side, RBI is trying to restrict revolving credit as a product, and there is also drought situation emerging in some of the critical credit pockets as well. How do you see the scenario play out, the scenario of high liquidity plus revolving credit getting tapered? Are you confident that we are not going to have a similar situation of asset quality issues? Sanjay Malhotra:
Yes, I mean NBFC growth rate has been quite robust, about 37% credit growth by banks to NBFCs, and NBFC credit growth itself is also quite robust. Overall, I think it is lower than that of banks. We will have to check, but I think it is less. NBFC credit to the real economy is lower than that of the banks. We do not see any issues or concerns relating to asset quality with regard to NBFCs. We are always alert to such risks getting developed, not only from an asset quality point of view, but as noted by the MPC, also on demand and price pressures getting built. So we are conscious of such risks, but we do not see any such risks getting built as of now. Hamsini Karthik:
Thank you. Brij Raj:
Thank you, Sir. I will request Ekta Suri from Zee Business to ask her question. Ekta, please. Ekta Suri, Zee Business:
Good afternoon, sir. Sir, my question is a slight follow-up on Hamsini's question. If there is no asset quality issue in NBFCs, then regarding the demand for revolving credit they argue that they reach the last mile, could some relaxation be given alongside term loans? Or is the RBI essentially telling NBFCs that this is not the rule, why did you start it, and whether the draft directions were meant to remind them of that? Sanjay Malhotra:
You asked the question and gave the answer as well. Primarily, as you said, the draft regulations we published are, in a way, a clarification. It is not a new rule or regulation because NBFCs were not permitted to offer revolving credit. This is not merely a clarification; directions in this regard were given multiple times to individual NBFCs during the RBI's supervision. Now, due to technological advancements, by using software and technology, revolving credit is being provided in the form of a term loan. Therefore, to incorporate this into the regulations, we have published the draft directions. We have received several comments regarding this, which we are reviewing. As I said earlier, we will take a fresh look at this, form our view, and will soon take a final decision, keeping in mind whether this poses any systemic risk, because it can carry liquidity risk. Keeping that in mind, this has not been allowed from before. Now, whether such conditions still exist or not, keeping all these factors in view, we will take a decision on the way forward. Ekta Suri:
Sir, with the changing times, could the RBI slightly change its view on this? Sanjay Malhotra:
You will come to know that going forward. When we give this a final shape soon, then you will come to know. Right now, its examination is underway. We have not had a full discussion on this at my level. The Department has examined it, studied it, analyzed it. Now they will present it before us. All the DGs, Governor, we sit together and take a collective decision. You will come to know about that soon. Ekta Suri:
Thank you, Sir. Brij Raj:
Thank you, Sir. I will request Anurag Shah from ET Now Swadesh to ask his question. Anurag, please. Anurag Shah, ET Now Swadesh:
Thank you, sir. Sir, the FCNR deposit scheme received a very good response. How big of an achievement does the RBI consider this to be? And what will be the RBI's expectations from banks now, given that liquidity has reached the banks and margins might also be affected to some extent? So, what kind of expectations will the RBI have? Sir, some intellectuals also believe that in the future, if the rupee weakens at the time of repayment, it could impact the treasury. How should they look at this? Sanjay Malhotra:
First of all, I would like to say that such a significant achievement with FCNR (B), around USD $135 billion, reflects the strength of our country's macroeconomic fundamentals and our economy. In such a short time and in such large volume, we have garnered these deposits, close to USD $135 billion. As far as the banks are concerned, I have full confidence that the banks will deploy these deposits prudently, after careful consideration, as they have done in the past and will do in the future. As you can see, there has certainly been a 19% growth in credit. We have a very high requirement and need for credit, so this is fulfilling an unmet demand. The banks will continue to do this prudently; that is our confidence in them. As far as the question of repaying it is concerned, as I told you, our macroeconomic fundamentals are very strong. This is a temporary development due to external headwinds, which has caused a slight dip in flows and put some pressure on our current account. It is a temporary issue, and sooner than later, our external sector will become even stronger from here. We are receiving all indications of this, whether it is gross FDI, services exports, remittances or the various steps being taken by the Government of India for reforms, ease of doing business, expanding FDI in sectors like insurance and others, or the rationalization of tax-related and other measures regarding government securities. Because of all these, we have full confidence that soon our BoP, which is in deficit right now, will move into surplus, as has been the case in previous years. We have adequate forex reserves, relying on which we will use them to repay this. Brij Raj:
Thank you, Sir. Sir, we will now take a few questions from the right side. I will request Sangita Mehta from Economic Times to ask her question. Sangita, please. Sangita Mehta, Economic Times:
Thank you. Sir, in post-policy reactions, some of the large banks have said that they are not planning to raise deposit rates for the next 2 to 3 months because of the surplus FCNR (B) deposits that they have. The question I wanted to know from you was that by when do you expect transmission to take place on the deposit side from the banks? And a connected question is that by when do you expect banks to use up the FCNR (B) deposits? Sanjay Malhotra:
We are already seeing the use of the FCNR (B) deposits, as evidenced by the high growth rate. But of course, the amount is so large, we do not want them also, at the same time, to use them overnight. They need to do their due diligence properly and take their time to use these deposits. On liquidity, there is today a surplus liquidity, much more than the liquidity that is required, but we believe that this is not a very long-term phenomenon because of natural reasons like currency leakage, reserve requirements of the banks, through our various operations that we do, whether it is spot, whether it is sell-buy swap operations that we have been doing earlier. We shall use these and this liquidity will get drained. Sangita Mehta:
By when do you expect the transmission to take place? Sanjay Malhotra:
As I said, it's not very long that we expect these surplus liquidity conditions to last. Within this financial year itself, I expect a large amount of this liquidity, without giving numbers, ₹3-4 lakh crore is generally in any year the CIC leakage that happens. Then the sell-buy swaps that we have already done, we are doing. We have other tools like OMO, the VRRs that we are using, the spot intervention that we do to support the rupee. All these things, I do not expect, without giving you any numbers, that the liquidity is going to remain in such high surplus mode for a very long period of time. Latha Venkatesh:
Sir, you know the FX swaps are expensive for the Reserve Bank. CRR would be cheaper for the system as a whole. Is that off the table? I just wanted to add that. Sanjay Malhotra:
Nothing is. You asked me in your interview also, I would not rule out anything. I don't want to rule out anything because it's still an evolving and an uncertain world. But I did mention to you that this is something which will be one of our least preferred modes of taking out liquidity. I would also like to mention over here you know when you talk about cheaper or expense or the cost to the Reserve Bank. I think we need to look at the cost to the economy and the benefits to the economy. These FCNR (B) deposits also raise some question on costs to the Reserve Bank. I mean, that is not our primary motive. I am sure all of you understand this, and I will request all of you to look at the overall benefits to the economy as a result of whatever operations we are doing, whether it is FCNR (B), whether it is some liquidity operation, whether it is monetary policy change, macroprudential measures that we may take. Profit is incidental, or the surplus is incidental. The primary purpose is the economy as a whole, how do we feel is going to be impacted as a result of our measures. Brij Raj:
Thank you, Sir. I will request Jaspreet Kalra from Thomson Reuters to ask his question. Jaspreet, please. Jaspreet Kalra, Thomson Reuters:
Thank you, sir. Governor, our question is on the INR. We have seen a massive amount of inflows come in. The RBI has been intervening as well, but both through market polls and in hedging behavior, we seem to see that the market does not seem convinced that the rupee depreciation trend is over. Does that worry you at all? What is your diagnosis of that problem? And why is that intervention required even after clearly it has been demonstrated that India can draw flows when it needs to and sort of defend the rupee? Sanjay Malhotra:
Markets can be quite irrational in the short run. They can be. It's only in the long run that they are able to find the right value. I mean, that is the short answer, I think, to your question. Jaspreet Kalra:
Would you describe current rupee markets as irrational? Sanjay Malhotra:
By a number of estimates, including the REER, the rupee is not overvalued, it may be undervalued. Brij Raj:
Thank you, Sir. I will request Alexander Mathew from NDTV Profit to ask his question. Alex, please. Alexander Mathew, NDTV Profit:
Good afternoon, Governor. I appreciate the opportunity. I am curious about the debate that seems to have occurred, and I am hoping you can give me some understanding of this - on the change of stance, because the decision to hike rates was unanimous. There were two dissenters to the decision to change the stance. I am wondering what was discussed and why the majority felt the need to announce a stance change in this policy. Sanjay Malhotra:
So, number one, we don't vote on it. It's not a vote. It's a view. It gives you a sense of our thinking and different people can think slightly differently in so far as the policy path, going forward is concerned, right? So now, I mean, in terms of what this path, what this change in stance means, I already explained this change in stance to tightening. Let me make two or three things clear. Even in our April 2025 statement that I made, I did try to give some sense and meaning, try to explain it, because it is important. See, cross-country, the meaning of tightening means interest rates or monetary policy with high interest rates and appropriate liquidity, which will constrain or curb economic activity. Whereas accommodation will mean a loose monetary policy where interest rates are low, liquidity, etc., is accordingly high, so that it spurs economic activity. And neutral means neither. In our context, we have used this more for policy guidance going forward, not so much for whether the policy itself is accommodative or whether it is restrictive. We are using it as a signal for our rates, for our policy action going forward. We use this word calibrated. So tightening means that, as mentioned earlier, rate cut is off the table, and it is only hiking or pause which is a possibility. Calibrated, means, that it's a milder form. You all understand it's a milder form of a tightening where the decisions have to be more measured, more calibrated to the evolving macroeconomic conditions. So, it's more data-dependent rather than kind of predetermined that a hike is, in any case, going to come forward. Alexander Mathew:
Governor, just to clarify, so therefore you mentioned this in your speech as well, but effectively you are trying to anchor inflation expectations. You were speaking about the duality of inflation and the fact you are trying to judge the second-order impact of that, so just to clarify. Sanjay Malhotra:
Yes. So, we really do not know as to what the impacts can be, and so we have to be data-dependent, and price stability keeping in view growth is our primary mandate. And we will continue to pursue this mandate that has been given to us. Brij Raj:
Thank you, Sir. I will request Piyush Shukla from ET Now to ask his question. Piyush, please. Piyush Shukla, ET Now:
Good afternoon, Governor, DGs. Thanks, Brij sir. Governor Sir, just a short while back, you mentioned how when it comes to cost, you have to look after the cost that RBI bears, you have to look after the greater good in the economy. October 15 onwards, the MDR is being applied. A lot of people are asking, are worrying, if the numbers can go down and whether the RBI should have foot the bill? First of all, do you feel that the numbers will go down? And at all, can RBI consider footing the bill for the larger good? And Sir, just one, there is a wide discussion that is going on about RBI rejecting top upper-layer... Sanjay Malhotra:
Which question do you want to ask? Please restrict yourself. Let's maintain that discipline, right? Piyush Shukla:
Sure, Sir. I will come back, but I just wanted to ask on this one. I will come back if no one else asks. Sanjay Malhotra:
See, MDR, already a decision has been taken. As of now, we do not see any drop in volumes. And I personally don't think that a small fee will have a major impact on the volumes. Brij Raj:
Thank you, Sir. I will request Shayan Ghosh from Mint to ask his question. Shayan, please. Shayan Ghosh, Mint:
Good afternoon, Governor. My question is that this whole episode of insisting that a holding company gets listed, even taking a legal route if required, what message do you think it sends to… Sanjay Malhotra:
You know my answer. Shayan Ghosh:
I wouldn't like to guess. Sanjay Malhotra:
No, see, we don't respond to questions pertaining to any one specific or related entity, right? So, kindly bear with us. If your question is not answered, we will come back to you. But you waste your opportunity by asking these questions. Brij Raj:
Thank you, Sir. I will request Aaryan Khanna from Informist Media to ask his question. Aaryan, please. Aaryan Khanna, Informist Media:
Thank you, sir. Good afternoon. So, my question is both to the Governor and to DG Gupta, if possible. With real GDP growth in Q1 remaining near 8% despite the geopolitical environment, has the assessment of India's potential growth rate increased according to the RBI's estimates? Does this also mean that India's neutral real rate of interest is higher now? Because it is a theoretical constraint, like in the current geopolitical environment, does India need a higher neutral real rate in general to draw in capital inflows? That's the question. Sanjay Malhotra:
Potential growth rate or growth, we don't have a number. On real rate, we had given some estimates, but these are very dynamic, difficult to measure, dynamic and evolving. What the real rate would be today, I mean - for whatever they are worth, some study has been done. We will give you those numbers. But looking at the global macro situation, as you have pointed out, there are different reasons - different countries will have. So, if a country is having very high inflation, which has been persistent for very long periods of time, unlike India, which is seeing a hike in inflation only in recent months, the situation is very different. If the public debt levels to GDP ratios are very different in those countries, then the interest rates will be different. So, while they have an impact on the global situation, that cannot be denied, but every country will have a different reason or a different context to the prevailing interest rates in their country. Aaryan Khanna:
Got it. Sanjay Malhotra:
Would you like to add? [DG(PG)] Dr. Poonam Gupta:
Sure. So there were three parts to your question. On potential GDP growth, if you look at the past few years, especially post-COVID, you do see that growth rate has been highly resilient to multiple global shocks, and this growth rate has coexisted with low and stable inflation. That is indicative of high potential growth rate that the economy has. Even in Q1, growth rate of 7.8% coexisted with very low inflation, and that would have been the case perhaps this year as well if two global shocks had not occurred, both climate and oil prices. And there are a number of indicators. Though there are no specific estimates we have, but the indicators show that the underlying strength and potential of the economy has increased. On natural real rate of interest, we have done a thorough literature survey. We have exchanged notes with other central banks. As Sir mentioned, it's a highly theoretical, fluid concept, which is important, but which cannot necessarily guide monetary policy. Your third question was, globally, cost of capital is increasing, what implications does it have for India? If you see actually - first you are absolutely right, demand for capital is increasing from hyperscalers and other new sources and demand that is coming up. But if you look at India, there are two or three factors which insulate us from those rising costs. One is fiscal prudence that we have, which stands us out from both in our asset class and certainly from other advanced economies as well. We are not seeing a hyper demand coming from, let's say, the sovereign, which is the case in other countries. And the other is that we have domestic sources of savings and investments, which reduces our dependence on global capital. So all of these factors make us a little bit more insular than many other countries are, that we have domestic sources of savings, corporates still have a lot of cash, bank credit growth we are looking at, which makes us insulated from what we are seeing globally. Thanks. Aaryan Khanna:
Understood. Thank you so much. So just to clarify, Sir. That the major takeaway seems to be that if India's inflation-growth situation does not need you to raise rates, you would you don't see the need to catch up or keep up with global economies. Is that correct? Sanjay Malhotra:
That's right. Aaryan Khanna:
Thank you, Sir. Sanjay Malhotra:
I mean the growth and inflation dynamics, both are important along with what the interest rate, the real interest rate should be, which do get impacted by global factors, but not to that extent as may be in some other countries. Aaryan Khanna:
Thank you. Brij Raj:
Thank you, Sir. Thank you, Madam. Sir, we will now take the remaining questions from the left side, and I will request media persons to please ask only one question. I will now request Falaknaaz Syed from Deccan Chronicle to ask her question. Falaknaaz, please. Falaknaaz Syed, Deccan Chronicle:
Good afternoon, Governor. Governor, have you taken a view on the distribution reforms proposed by the insurance regulator, which has proposed a very steep cut in commissions that banks earn by selling third-party products? Have you formed a view on that, and what is your take there? Sanjay Malhotra:
We have not formed. If you ask me, you have formed a view, we have not formed any view. I suppose the regulator obviously has - first of all, it's a draft, so they will take comments from all stakeholders, including the industry and the consumer groups, etc. It is primarily, I think, in consumer interest, to reduce costs, and also at the same time to prevent or reduce mis-selling. They will take a call, I think, in the best interest of the consumers and the industry. Brij Raj:
Thank you, Sir. I will request Lalatendu Mishra from The Hindu to ask his question. Lalatendu, please. Lalatendu Mishra, The Hindu:
Good afternoon, Governor. My question is a supplementary question to what Anup had asked. There is a 100% - up to 100% tariff threat from the US, and the Finance Minister earlier this week said it has reached a plateau because the US is asking for more, which you can’t give more. What could be the impact in case the deal doesn't take place, on our economy, Sir? Thank you. Sanjay Malhotra:
See, we don't know first of all, which sectors, etc., to what extent these tariffs are going to be applied. So, it's premature, actually to answer, but obviously it will have some negative impact. At the same time, we have had a number of trade agreements now in the recent past, many of them - some of them have been operationalised others are in the pipeline. They will help. The industry at the same time has diversified its exports. All these things, I think, will mitigate the effect in case there is an additional tariff on some of the sectors. Brij Raj:
Thank you, Sir. I will request Nachiket Kelkar from Business Today to ask his question. Nachiket, please. Nachiket Kelkar, Business Today:
Good afternoon, Governor. My question relates to the new FEMA rules that came into effect from 1st of October. There are lot of complaints or concerns that are being raised with respect to the new form that the export declaration form that now needs to be filled. Even smaller freelancers or content creators are subject to that form, which they say is going against the ease of doing business we talk about on the other hand. Is RBI going to relook at some of these things? What is your opinion on that? Sanjay Malhotra:
Rohit [DG(RJ)], will you take this question? Rohit Jain:
The new trade regulations were issued in January, sufficiently in advance of the timeline of October 1. They have come into effect from October 1. And the whole intent of bringing these new trade regulations has been to liberalize the handling of trade matters by authorized dealers, simplify the processes, promote ease of doing business. And the service exports and imports have been included for reporting purposes now, but the individuals are not included with respect to the reporting requirements for the contracts of a personal nature. So, there seems to be some misunderstanding on the reporting obligations, which we will clarify shortly through an FAQ. But the whole gamut of new trade regulations are a step forward to simplify matters, reduce the burden on authorized dealers, as also on the concerned exporters and importers. It's a way forward in a positive sense. Sanjay Malhotra:
Two more clarifications I will give. One clarification he has given is that, as individuals, whether for imports or for exports, irrespective of the amount, are not required to be reported. I think there is some doubt with regard to that. They are not required. So, if you are subscribing to a TV channel or an app or to some journals or newspapers, or you are providing, on the other hand, services as an individual outside, could be tutoring services, could be some small software, etc., and getting paid for it, those, as individuals, are not required to be reported. As already clarified by Rohit [DG(RJ)], it's important. That's why I am repeating this for the benefit of your viewers. And the second is that for small amounts, even the exporters, if the amount is small, up to ₹10 lakhs per bill, not annually, per bill ₹10 lakhs, then a self-declaration will suffice. In an invoice, there is some concern about uploading and giving invoices, but up to ₹10 lakhs, an alternative has been given, which is in the form of a self-declaration form. The third is that on the portal that we have, the reporting is to be done by the banks and the ADs, by the intermediaries, and not by the individual exporters and importers. They have to only provide this information to the ADs or the banks. Now, some of this information they were already providing. At the time of the payments, they were providing a purpose code and some other information. Some more information is what we have asked them to provide, and this will only improve our data reporting and availability of data with respect to services exports. And so, we feel that it is not a major inconvenience or a burden. Goods, for merchandise trade, this is already happening. So, in that sense, we have tried to bring the services at par with the merchandise trade. Brij Raj:
Thank you, Sirs. I will now request Ben Jose from The New Indian Express to ask his question. Ben, please. Ben Jose, The New Indian Express:
Hi, Governor. You increased the growth forecast by 40 basis points. You increased the rate by 25 basis points. Is there a disconnect? When you increase the interest rate, that is, the economic activity has to be tamed, right? It should have an impact on the growth. But you are increasing the rate because - and you say that, okay, the higher rates are for longer. You change your stance. Still, you increase the growth forecast. Are you expecting the transmission to be delayed? Because there is excess liquidity in the system, so banks won't pass on the rate, at least to new customers? How is this two different. Sanjay Malhotra:
I didn't follow your question. Ben Jose:
Sir, the growth forecast has been increased to… Sanjay Malhotra:
40. Ben Jose:
40 basis points? Sanjay Malhotra:
Yes Ben Jose:
So, if the interest rates - because there is excess demand in the economy, that is why you want to contain the demand. That is why you increase the rate. What is, the impact of the rate increase to growth? Sanjay Malhotra:
No, I clarified this. I think, if you read the resolution, we have mentioned that there are some 3-4 channels, but broadly three channels. One is just the recalibration, because the rates were in an environment when it was very, very low. So that is the recalibration channel, where the inflation is kind of normalizing. The other is the supply-side channel, because there are high energy prices and some food, etc., so there are some supply-side pressures. And within supply-side pressures, we said that there are three channels. There is a direct channel, there is an indirect channel, and there is a second-order effect channel. And then we said demand, that is the third channel. And we have given detailed reasons as to where we see pressures coming and to the extent that we are getting those pressures. I think it's very, very clearly articulated. So, as of now, we see a normalizing certainly of inflation happening, and so a recalibration is imperative, as the MPC noted. And there are some signs, though limited, of second-round effects, which are difficult to distinguish from indirect effects. And we will be looking at data more closely as to whether we need to do more or not. And similarly, for demand, we see limited, very limited signs. Even though growth is resilient, we do not see that putting pressure on prices, you would have seen the margins of the companies going up, which we don't see for example, right? As an example, demand-side pressures are quite limited, even though aggregates, monetary as well as credit aggregates That has been explained quite clearly. I will request you to again have a look. Brij Raj:
Thank you, Sir. I will request Manish Suvarna from the Press Trust of India to ask his question. Manish, please. Manish Suvarna, PTI:
Good afternoon, Sir. Sir, in the policy statement, you have mentioned that likely resilient non-farm activity will continue to support the rural consumption. But I want to understand how confident are you that this likely resilient non-farm activity can fully cushion any further weakness in the farm income and rural consumption due to the weak monsoon, what we are witnessing? Sanjay Malhotra:
We have factored in all these conditions and on that basis, there is some slowing in the agricultural output. That’s why, and similarly rural demand, and that's why you are seeing that from the high of almost 8% growth last year, we are at 7.1% this year, and even Q1 is 7.1%. All these things have been factored-in in our estimates. Brij Raj:
Thank you, Sir. I will request Saurabh Pandey from IANS to ask his question. Saurabh, please. Saurabh Pandey, IANS:
Good afternoon, Governor, Sir. Sir, you recently said that stretched valuation in global AI stocks pose a key risk to financial stability and correction could redirect foreign capital into emerging markets like India. If you can please elaborate on the same. Sanjay Malhotra:
Are you referring to my speech at the Kautilya? Yes, so, see, that speech was more in the context of the because it was a global audience, it was more in the context of what are the global risks to emerging market economies, and in that context, what are the risks to India. So AI certainly stretched valuations, their correction, sudden corrections can be a concern for various economies. But for India, since we do not have too much of AI over here, we do not see any major negative impact. If at all, there can be it may be positive, if at all there may be. That was the context in which I had made that statement. Brij Raj:
Thank you, Sir. I will request Akash Mandal from Indian Express to ask his question. Akash, please. Akash Mandal, Indian Express:
Good afternoon, Governor. You had said in your statement, and you had referred just now also, that there are limited signs of supply-side pressures getting embedded in pricing behavior. But we have seen that retail inflation has not risen nearly as much as we have seen wholesale and producer price inflation rising since the West Asia conflict. Do you see a pass-through and these two normalizing, going forward? Do you see it imminent? And how much of it have you sort of factored it in your inflation estimate of 5.8% over the next two or three months, especially since demand environment remains seemingly robust and you have also raised the growth estimates? I just wanted some color on that. Sanjay Malhotra:
So, we have seen as mentioned. We have seen only a partial pass-through. Some of it is happening and shall happen. Now to what extent it will happen will depend on the persistence of the supply-side pressures. And that's why we are saying that we need to be data-dependent, going forward with respect to our policy. We are already seeing 37% of the items are more than, for example, 4% inflation rate. And that is continuing. Now, to what extent it further passes on, is something that we need to see. Brij Raj:
Thank you, Sir. We will take the remaining questions from the right side. I will request Ramkumar from The Hindu Business Line to ask his question. Ramkumar, please. K Ramkumar, The Hindu Business Line:
Sir, given that banks and NBFCs are having a good run on the credit growth front, so will this rate hike not dampen the loan growth, loan demand, actually? Sanjay Malhotra:
Swaminathan [(DG(SJ)], why don’t you take this? Swaminathan J:
As we noted earlier as well, the credit growth has been we can atleast say, if not all-time high, at least decadal high at about 18%, 19% already. But if we take a long-term average of, say, 10 years, generally, it is seen in the range of 12% to 14%, which is very sustainable and very supportive of growth. Some moderation, in any case, will occur. Yes, as these rates transmit, as we have seen, it typically takes about a couple of quarters for transmissions to materialize. Some moderation will occur relating to demand as well as rate together. But a moderation from 20% to 18% is not bad and will be adequate enough to support growth. Brij Raj:
Thank you, Sir. I will request Mayur Shetty from The Times of India to ask his question. Mayur, please. Mayur Shetty, Times of India:
Good afternoon, Governor. Governor, the insurance regulator in their distribution reforms, they have targeted banks. I mean, it impacts banks in a number of ways their fee income, the products, the credit life, and also, they have commented on their behavior. This issue was there in the Financial Stability Report also for bank selling. Is there going to be any coordinated action between the regulators on this? Sanjay Malhotra:
This is in the realm of the insurance regulator to decide as to what and how they want to do the distribution of insurance products. We will give our comments as mentioned, we have not firmed-up our view on this. We will give our comments to them. Mayur Shetty:
Thank you. Brij Raj:
Thank you, Sir. I will now request Shyama Mishra from Doordarshan to ask her question. Shyama, please. Shyama Mishra, Doordarshan:
Greetings, Sir. Sir, the 2026 monsoon has been the driest since 2000-2001, and many States including Bihar, Punjab, Maharashtra, they have received below-average rainfall. Going forward, what does this mean for the household? How do you assess the situation amid already rising inflation? Sanjay Malhotra:
Obviously, it has an impact. But as mentioned, the impact has been moderating over the years. The Indian rural sector, agriculture, farm and non-farm, put together, the resilience has increased as a result of a number of measures that have been taken both for increasing the use of irrigation, use of more climate-resistant varieties and practice agricultural practices on the farm side, and similarly on the non-farm side. So, while there is going to be some impact on their incomes, we feel that they will be quite resilient. Brij Raj:
Thank you, Sir. I will request Kshipra Petkar from Financial Express to ask her question. Shipra, please. Kshipra Petkar, Financial Express:
Thank you, sir. Good afternoon, Governor. With the ECL implementation now just 6 months away, what is the RBI's assessment in terms of banks' preparedness for it? And in your discussions with them, have there been any key implementation challenges that they have flagged? If you can just elaborate. Sanjay Malhotra:
Shirish [DG(SCM)], do you want to take this? Shirish C. Murmu:
See, this ECL framework, we had come out in very advance. So, obviously, banks are well prepared and otherwise also we are in touch with bankers, and as and when we have an interaction, we deliberate if any issues are there. Our assessment is the transition will be smooth. We don't feel that there will be any issue. And of course, when we came out with this framework, we had also a back testing at that point of time, and we are continuously monitoring. In addition to that, we are also having a workshop where we clarify and do the handholding. Brij Raj:
Thank you, Sirs. I will now request Saurav Mukherjee from ANI to ask his question. Saurav, please. Saurav Mukherjee, ANI:
Thank you, Governor Sir. In your opening remarks, the RBI has flagged AI as a risk to the global economy. What specifically worries you, Sir? The risk of AI-driven asset bubble, disruption to labor market, or the broader impact on global financial stability? Sanjay Malhotra:
All these risks are material. I think, for us as central bankers, the most significant of these is cyber risks. Already in this day and age, when IT is being used by all systems and when there are no borders between the financial systems and they interact with each other, AI adds another dimension to it, and so we have to be very vigilant with regard to these. We are already taking a number of measures through our regulation and supervision departments, and we are fortifying our systems so that we are able to mitigate and prevent cyber risks from emerging. Brij Raj:
Thank you, Sir. I will request Prarthana from Akashvani to ask her question. Prarthana, please. C. Prarthana, Akashvani:
Good afternoon, Governor. The RBI statement released today mentions constitution of a Technical Consultative Committee for Financial Markets. Could you please elaborate on that? Sanjay Malhotra:
Rohit [DG(RJ)], would you like to take it? It's your subject. Rohit Jain:
So, as we have seen, the financial markets have been widening, deepening, a lot of reforms have been done, and we are taking various regulatory measures to further strengthen the markets and also develop the markets further. So, we were already doing a lot of engagement with market participants, a lot of dialogue happens, but we thought that, in view of the extreme volatility that we are seeing globally and the need to have expert views in a structured way, we are institutionalizing this arrangement where we will constitute a technical committee of expert. And we will meet them at periodic intervals to take their inputs, their suggestions, with the whole idea that we will be able to improve policy making and also the operational issues that financial markets face. We will be able to get better understanding and information relating to this and it will help the overall cause of developing our financial markets to serve our needs. Brij Raj:
Thank you, Sirs. We now come to the last media person. I will request Soumyajit Saha from Nikkei to ask his question. Soumyajit, please. Soumyajit Saha, Nikkei:
Thank you, Governor. I don't have a question - a specific question, but I just want to understand what the oil price assumption is in-house, if it has changed from August, and if it has changed, what the reasoning is behind your change in those assumptions. Sanjay Malhotra:
Would you like to answer this? [DG (PG)] Dr. Poonam Gupta:
Sure. Oil price assumptions are given in the MPR, which has been released this time along with policy. It has increased by US$5 a barrel, and the reason is re-escalation of the conflict, prices remaining high, and the forward markets predicting that the prices would be higher than was seen in the last couple of policies. So, taken together, it is an increase, but it's, quantitatively, not a very large increase. As you know, the situation is evolving, and this is our best estimate at this time of how the annual average will turn out to be. Sanjay Malhotra:
US$95? Dr. Poonam Gupta:
US$95, yes. Brij Raj:
Thank you, Sir, and thank you, Madam. Sir, with your permission, we will now conclude this press conference. Latha Venkatesh, CNBC TV18:
Just one more, Sir. Rupee has fallen ₹50 paise today, Sir. It is very close to the all-time low of ₹96.96. We're at ₹96.83. Is there any reaction, any further steps? Should we be worried? Sanjay Malhotra:
As I mentioned to you, we will ensure that the rupee stabilizes, that the rupee finds its correct value, and we will support the rupee in an orderly movement of the rupee and in finding its correct value, and at the same time, in ensuring that there is no excessive volatility. Anurag Shah, ET Now Swadesh:
Sir, there were 24 questions in English and only 02 in Hindi. And Sir, there was a very big announcement... Sanjay Malhotra:
You are only two people, so there are two. Anurag Shah:
Sir, but the country's population is 100 crores. Sir, it was a very big announcement. A big announcement related to common people was made, and no one asked a question about it, Sir. It was related to Account Aggregator... Sanjay Malhotra:
Thank you very much, otherwise. I was going to mention this myself. Anurag Shah:
Sir, so the question is related to that, and... Sanjay Malhotra:
Since you have asked, that's good. Please ask. Anurag Shah:
Sir, to provide some context so that people understand the benefit. Sir, in May-June, a draft was issued by you regarding financial products sold through banking services, which also includes insurance, and taking that forward, IRDAI also issued a discussion paper where at the end, it is the people who will benefit, the banking customers will benefit. And Sir, this Account Aggregator, how big of a development is this, and for the common people, for the rural... Sanjay Malhotra:
I wanted to explain this. For everyone's convenience, you didn't ask about the Account Aggregator earlier, but you asked at the end, so thank you that you paid attention to it. Yes? Anurag Shah:
Yes, Sir, about the Account Aggregator... Sanjay Malhotra:
So, Account Aggregator is an important means, and I would like all of you to kindly publicize this, because it is of use not only for the economy, even for you as individuals, because it gives you an overview of all your financial assets.
And so, this is now a step to integrate the information that could have been got through a number of account aggregators. There are, I think, at least 15 or so of these account aggregators, so the information was quite disaggregated. And by integrating them, now it is possible for you as individuals, as well as for other users - could be insurance brokers, could be asset managers, and investment advisors, etc., to take data with consent, with consent of the individual concerned, and appropriately advise all of us. So, this is one, and the other is, some of you would be getting a CAS, a Consolidated Account Statement. It does not have information on bank deposits, which is a missing piece. So, we are now trying to facilitate that information relating to bank deposits across all banks, whichsoever are already onboarded, and rest will be over a period of time, with anyone account aggregator to get available to you through CAS. Thank you very much. Hamsini Karthik:
Why are you doing this, Sir? What is the logic of including bank deposits in CAS? Sanjay Malhotra:
Would you not like to have that information? I mean, I would like to have it i.e., my consolidated account statement. And so, at a glance, every month, if I get that information, that is I think, empowering the consumers. We see a lot of banks, a lot of cases of, what do you say, these bank deposits getting lost, and especially when people die, etc. And so, it will also help in that, because you have one view of all your financial assets. Ekta Suri:
Sir, the regulator also issued a direction - the suggestion they gave on how to stop money going into mule accounts so that people get their money back - you issued a draft stating that the money should be blocked, and if the account is very suspicious, it becomes a mule account. So, Sir, in the public interest, we would like to know, how quickly should someone report this, and if money has gone into an account and it has already been withdrawn, cannot be blocked, what should the victim do in that case? Sanjay Malhotra:
An SOP has already been issued for that, and under that SOP, the sooner you inform, the faster the information will reach the banks, allowing the account or the amount, whatever it is, to be frozen and returned to the owner. So, it should be done as quickly as possible. Thank you. Brij Raj:
Thank you Sir. Thank you all for your participation, and a good day ahead. |