Reserve Bank of India (RBI) Governor Sanjay Malhotra
| Photo Credit:
SHASHANK PARADE
With expectations that underlying inflation will continue to remain benign and growth prospects appearing to be strong, the benchmark policy rates will likely remain at low level for a long period of time, Reserve Bank of India Governor Sanjay Malhotra told reporters at a post-monetary policy committee (MPC) meeting press conference on Friday.
Edited Excerpts:
Does the pause mean we have reached the terminal repo rate at 5.25?
This is a question for the MPC to answer. We will continue to be data-dependent. And we are at a neutral phase. Only one MPC member wanted to change the stance from neutral to accommodative. All others wanted neutral stance, which means given the present state of economy and the forecast over 9 month-1 year period, this is the rate we expect to continue. I may mention, however, that we are in a good spot. Underlying inflation is low, even forecasts are much lower than the inflation target. Headline inflation can go up and down. And so I do expect policy rates to continue to be at low levels for a long period of time. Whether repo rate will reduce further, I will leave it for the MPC to decide.
How do you view the immediate fall in overnight money market rates?
Ensuring liquidity is our duty — ample and sufficient liquidity as required to meet the productive needs of economy. Secondly, we have to ensure transmission of repo cuts happens not only in money markets, but in government securities markets, corporate credit markets and all other markets. Whatever we do with regard to liquidity is guided by these goals. We have a number of tools to provide liquidity and keep overnight rates near the repo rate, including open market operations (OMOs), variable rate repo auction (VRRs), variable rate reverse repo auctions (VRRRs). Transmission, as you are aware, has been good till December across markets. Post December, there was some hardening in money markets, but overall it has been excellent.
Is the RBI comfortable with credit-deposit ratio of 80-90%?
This is a cyclical trend. In a period when credit growth is faster than deposits, it is expected that CD ratios will go up, and at times when credit is not growing so much, it will come down. We have seen this happening over and over. But I may mention that for us, it is not the CD ratio that is important. Important aspect to look is liquidity available with the banks. There are liquidity coverage ratio (LCR) and net stable funding ratio (NSFR), which we are looking at, and both these parameters are at very comfortable level with both banks and non-banks.
The RBI is selling US Treasury bills for sometime now…
Certainly not. Overall, our forex reserves had come down. As a result of it, all holdings will change. Those are fluctuations on a day to day or week to week basis, but there is no reduction in our holdings of the US treasury bills.
The Centre has reduced its subsidy for UPI in the Budget. There is a request from payment industry players to impose MDR on larger merchants for peer-to-merchant transaction. Is the RBI amenable to this request?
On UPI, someone has to pay for the cost. Having said that, it is in the domain of the government. And I am very sure that we will certainly be able to find ways not only to sustain but also improve this very important payment infrastructure, which is very unique and will remain so in the years ahead. There should not be any concern to any stakeholders. I think we will be able to find a way of sustaining this and improving it.
Published on February 6, 2026
