RBI Governor Foresees Prolonged Low Policy Rates

During a press conference on Friday, Reserve Bank of India Governor Sanjay Malhotra indicated that key policy rates will remain at low levels for a prolonged period and could potentially decrease further. This comes after the central bank opted to maintain the repo rate at 5.25% during its bi-monthly monetary policy meeting, keeping a neutral stance.

Malhotra emphasized that any rate decisions will be made by the Monetary Policy Committee (MPC). Since last February, the RBI reduced the repo rate by 125 basis points. He remarked on the slower transmission of policy changes to deposit rates, predicting further decreases in interest rates for fixed deposits.

Addressing economic growth, Malhotra noted that trade agreements signed by India and other factors might contribute up to 20 basis points to GDP growth. Deputy Governor T Rabi Sankar mentioned that the RBI is prepared to manage the government's borrowing program effectively, while Malhotra highlighted that T-bills will assist in yield curve management. He also acknowledged an increase in currency circulation over the past year.