Malhotra said the RBI expects full-year inflation to remain below 3.7%, well under the midpoint of its 2–6% tolerance band. June retail inflation fell to a six-year low of 2.10%, driven by easing food prices, according to data released Monday.
“We’re in a neutral stance, which means we can move in either direction depending on the outlook, not just the current data,” Malhotra said, underlining that the monetary policy committee (MPC) will weigh both inflation and growth before making its next move. “One cannot say inflation is more important than growth, it’s always the mix of both factors.”
The RBI has already delivered two consecutive rate cuts, including a surprise 50 basis points cut in June. Many had expected the central bank to pause in August, but the sharp drop in inflation may have changed the equation. The next MPC meeting begins August 4.
“Price stability is our core objective,” Malhotra said, adding that the RBI looks closely at the composition of inflation, including the momentum and base effects, rather than just the headline number.
Lower lending rates could boost both consumption and investment. “There’s been a 24 basis points transmission on new loans and 16 basis points on outstanding loans in the three months till May 2025,” he said.“If inflation is lower and the forecast is lower, or if growth is lower, policy rates can be cut,” Malhotra said.He noted that rural consumption remains strong and voiced optimism over a potential trade agreement between India and the US. Current growth estimates stand at 6.5%, aligned with the RBI’s latest projections.
“There are mixed signals but they’re aligned with our expectations,” he said. “The monsoon is favourable, optimism in consumer surveys is high, trade deals are ongoing, we will continue to review our growth projections.”
The Governor also said the RBI is reviewing bank ownership norms. While foreign banks are currently allowed to hold up to 26% in Indian banks, Malhotra suggested this cap may need a fresh look.
“Not allowing foreign banks to own 26% stake in Indian banks defies logic,” he said, adding that requirements could be revisited if there are formal requests. However, he ruled out issuing bank licences to corporates.
