Reserve Bank Governor Sanjay Malhotra on Wednesday expressed confidence that given favorable inflation conditions, interest rates will remain low in the medium to long term. Addressing the media in the press conference held after the monetary policy, Malhotra said that the Indian economy is very strong, flexible and robust. He said that we are in a neutral stance… the possibility of going either way cannot be ruled out, which means it is also possible that low rates may remain for a long time.
He said that despite the shocks, RBI is estimating 6.9 percent GDP growth for the current financial year. Structurally, in the long term, macroeconomic fundamentals—due to several measures taken by the government, RBI and various institutions—remain very strong. On one hand, they are giving impetus to development, and at the same time, they are also keeping the pressure on prices under control. He further said that therefore, it is entirely possible that even in the short to medium term, interest rates will remain low.
No change made in repo rate
Earlier in the day, the Reserve Bank of India kept its key repo rate unchanged. It adopted a ‘wait-and-watch’ approach as policymakers assessed the impact of the six-week Iran conflict on energy supplies, inflation and growth. The central bank’s six-member monetary policy committee unanimously decided to keep the benchmark repo rate unchanged at 5.25 percent. The committee pointed to increased uncertainty following the Middle East conflict, which has led to sharp rise in crude oil prices, weakening of the rupee and disruption of trade flows. Malhotra also emphasized that the ceasefire has also been taken into consideration in the monetary policy review.
Changes in growth and inflation estimates
On the GDP growth front, RBI has projected the Indian economy to expand at 6.9 per cent in the current financial year, which is lower than the expected 7.6 per cent growth in FY2026. The inflation estimate for 2026-27 (April 2026 to March 2027) is 4.6 percent, which is within the RBI’s target range of 2 percent to 6 percent. Regarding the impact of the series of rate cuts made by RBI, Malhotra said that as against the 125 basis point reduction in repo rate, banks have passed on the benefit of reduction of about 90 basis points in terms of loans to the customers. He said that similarly, in case of deposits, it is more than 100. Therefore, its effect has been satisfactory.
RBI on rupee
When asked about the restrictions imposed on the currency market, he said that these steps were taken to prevent excessive fluctuations in the rupee, and these are not structural changes in any way. He said that we are fully committed to the development, expansion and deepening of these markets… Obviously, these are not measures that will remain in place forever. He further said that these steps were taken in view of the increased volatility in the forex market in the last few weeks of last month.
two weeks ceasefire
America has agreed to a two-week ceasefire with Iran. President Donald Trump made this announcement 90 minutes before the end of the deadline under which he had threatened to wipe out civilization from the West Asian country. Trump made this dramatic announcement on Tuesday evening (US time), when the Democrats were demanding his removal from the post due to his absurd threats to destroy the civilization of Iran.