There is scope to further reduce policy interest rates, says RBI Guv

MUMBAI: Reserve Bank of India Governor Sanjay Malhotra said in an interview with Zee Business on Monday that there is scope to further reduce policy interest rates.

“At the last MPC (monetary policy committee) meeting in October, it was communicated clearly there is room to cut policy rates,” Malhotra said.

“Since then, the macro-economic data we have received has not indicated that the room to lower rates has decreased. There is certainly room (to lower rates) but whether the MPC takes a call on that in the coming meeting or not, depends on the committee,” he added.

The MPC cut rates by a total 100 basis points in the first half of 2025, but has maintained a pause since August.

Members of India’s interest-rate panel indicated there was scope for future rate cuts as the country’s inflation outlook turns more benign, minutes of the October meeting showed.

India’s retail inflation slumped to a record low of 0.25 per cent in October, driven by a sharp fall in food prices and tax cuts on consumer goods, paving the way for a rate cut by the central bank in December.

India’s 10-year benchmark bond yield eased slightly after the governor’s comments. However, despite economists expecting a rate cut in the next policy meeting, overnight indexed swap rates - the closest gauge for market expectations on policy rates - suggested a status quo.

Malhotra also said the recent decline in the rupee has been natural and though the Reserve Bank of India intervenes to manage excess volatility in the currency, a 3-3.5 per cent annual depreciation in the rupee is in line with the historical average.

The rupee fell to a record low of 89.49 on Friday, weighed down by portfolio outflows and worries over trade frictions with the US It has declined a little over 4 per cent this year, and ranks among the worst performing Asian currencies.