Another Rate Cut On The Cards? RBI Governor Hints At Possibility If Inflation Eases | Economy News

Last Updated:July 16, 2025, 08:15 IST

While maintaining that price stability is the RBI’s primary mandate, Malhotra stressed that growth remains equally important

Reserve Bank of India Governor Sanjay Malhotra

The Reserve Bank of India (RBI) could consider further interest rate cuts if inflation falls below projections or economic growth falters, Governor Sanjay Malhotra told CNBC-TV18 in an interview on Tuesday.

“The monetary policy committee will always factor in the evolving situation, the outlook, and then decide what the economy really needs,” Malhotra said. He added that a rate cut would be possible if inflation undershoots forecasts or if economic momentum weakens.

While maintaining that price stability is the RBI’s primary mandate, Malhotra stressed that growth remains equally important. “One cannot say inflation is more important than growth; it’s always a mix of both factors,” he noted.

His comments come a day after India’s retail inflation dropped to its lowest level in over six years, largely driven by easing food prices. Inflation is now expected to fall below the RBI’s earlier forecast of 3.7% for the year.

Malhotra reaffirmed the RBI’s GDP growth forecast of 6.5% for FY26, noting it remains in line with internal expectations. “The monsoon is favourable, we’re seeing optimism in consumer surveys, and trade deals are underway,” he said, while also acknowledging mixed signals from the broader economy.

Since February, the central bank has lowered the benchmark repo rate by 100 basis points, including a 50 bps cut at its most recent meeting, where it also adopted a more hawkish-neutral stance.

The RBI remains committed to aligning overnight borrowing costs with the benchmark repo rate, currently at 5.5%. “We aim to manage liquidity through absorption or injection as required,” Malhotra said.

Review of Bank Ownership Rules

The governor also revealed that the central bank is reviewing its rules on bank ownership, including proposals to allow foreign strategic investors to raise their stakes in Indian banks.

Currently, foreign investors—such as portfolio investors—can hold up to 74% in private banks, but strategic investors are capped at 15%. The RBI is considering relaxing this limit to 26%, subject to regulatory approval.

Malhotra clarified, however, that the RBI is unlikely to revisit its concerns over allowing business conglomerates to own banks. “Conducting business and real economic activities within the same group presents a conflict of interest,” he said.

Liquidity Framework Review Soon

An internal committee has also been examining the RBI’s liquidity management framework. Malhotra said a report on its findings is expected to be published by the end of July.

Aparna Deb

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More

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