RBI Governor Sanjay Malhotra
Reserve Bank of India Governor Sanjay Malhotra said in an interview to a private news channel that there is scope for further reduction in the policy rate cut. Malhotra said that in the last MPC (Monetary Policy Committee) meeting held in October, it was clearly stated that there is scope for reduction in policy rates. He further said that since then, the macroeconomic data we have received has not indicated that the scope for cutting interest rates has reduced. There is definitely scope (to reduce rates), but whether the MPC takes a decision on it in the upcoming meeting or not depends on the committee.
Loan EMI can be reduced?
The MPC cut interest rates by a total of 100 basis points in the first half of 2025, but put it on hold for some time from August. Members of India’s interest rate panel indicated that there is scope for cuts in interest rates in the future. Inflation is decreasing in the country, as is known from the details of the October meeting. India’s retail inflation fell to a record low of 0.25 percent in October, driven by a sharp fall in food prices and tax cuts on consumer goods, paving the way for the central bank to cut interest rates in December.
There was a big fall in the rupee
India’s benchmark 10-year bond yields fell slightly after the governor’s comments. However, despite economists expecting an interest rate cut at the next policy meeting, overnight indexed swap rates – the closest gauge of market expectations on policy rates – were indicating status quo. Malhotra also said that the recent decline in the rupee is natural and although the RBI intervenes to control excessive volatility in the currency, the 3-3.5 per cent annual decline in the rupee is in line with the historical average.
The rupee fell to a record low of 89.49 on Friday due to portfolio withdrawals and concerns over trade disputes with the US. It has declined a little more than 4% this year, and is one of the worst performing Asian currencies.