RBI Governor Hints at Rate Cuts As Inflation Cools

Mumbai: The Reserve Bank of India (RBI) is open to cutting rates again with inflation falling to its lowest level since January 2019, its governor, Sanjay Malhotra, hinted in a TV interview. Speaking to a TV channel, Malhotra said, "We're in a neutral stance, which means we can move in either direction depending on the outlook, not just the current data.” "The MPC will factor in the evolving situation and then take a call as to what kind of rate and policy the economy really needs. If the situation is lower, the forecast is lower, growth is lower, certainly the rates can be cut," the governor said, adding that the RBI has to wait and watch. The governor clarified that the MPC does not favour one objective over the other. "One cannot say inflation is more important than growth; it's always a mix of both factors." His comments come as many economists had ruled out further rate cuts since the RBI had cut its repo rate by 50 basis points in June, a larger than expected move to support economic growth. Besides, the central bank had also cut the repo rate by 25 basis points each in February and April. With the June cut the RBI reduced rates by a cumulative 100 basis points in 2025 to boost economic growth. The governor said that the RBI expects full year inflation to remain below 3.7 per cent well under the midpoint of 2-6 per cent tolerance band. India's CPI inflation moderated to a 77-month low of 2.10 per cent in June 2025, compared to 2.82 per cent in May 2025 and 5.08 per cent in June 2024. The decline is mainly due to decline in food inflation which is also at a 77-month low of 0.20 per cent lead by continued decline in prices of vegetables, pulses and spices. On economic growth, the RBI chief said that the current estimates stand at 6.5 per cent, 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.” On monetary transmission, the RBI chief said that transmission of its past repo rate cuts is still ongoing but still in its early stages. In the three months to May 2025, new loans saw a 24 basis points transmission while outstanding loans saw 16 basis point reduction in interest rates. The Governor ruled out issuing bank licenses to corporates but said that the RBI is reviewing bank ownership norms. While foreign banks are currently allowed to hold up to 26 per cent in Indian banks, Malhotra suggested this cap may need a fresh look.