RBI MPC meet: Key highlights from Governor Sanjay Malhotra's speech

RBI Governor Sanjay Malhotra said a favourable monsoon, along with the supportive policy of the government and the central bank, augurs well for the economy

The Reserve Bank of India's (RBI's) six-member Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, concluded its 56th MPC meeting on Wednesday. The August policy announcement, which comes after the MPC meeting from August 4 to 6, was held amid ongoing geopolitical uncertainties, US President Donald Trump's tariff escalations, and a moderation in the Consumer Price Index (CPI)-linked inflation

Governor Malhotra said a favourable monsoon, along with the supportive policy of the government and the central bank, augurs well for the economy. While global uncertainties are mostly abated, tariff challenges remain, he added. 

Here are the highlights from Governor Malhotra's speech:

• Repo rate: The MPC kept the repo rate unchanged in the August meeting. Because of this, all external benchmark lending rates linked to the repo rate will also remain unchanged. In June, the repo rate was slashed by 50 basis points (bps) to 5.5 per cent, marking the third straight cut.
• Inflation: The CPI-linked inflation forecast for FY26 was revised downward to 3.1 per cent from 3.7 per cent. The quarterly forecasts have also been cut substantially.
• Growth: As for the growth estimates, the RBI has retained its Gross Domestic Product (GDP) forecast for the current financial year at 6.5 per cent. The quarterly projections also remain the same. According to the latest data, India’s GDP expanded by 6.5 per cent in 2024-25.
• Stance: The MPC maintained its 'neutral' stance, which was changed from 'accommodative' to 'neutral' in June.
• Liquidity: The 100 bps cut in Cash Reserve Ratio (CRR) will boost liquidity from September. An internal working group was formed by the RBI in 2020 to review the liquidity management framework over the last five years. The report will be published on the RBI's website soon.

Financial stability

Malhotra said the financial outlook remains strong, with capital adequacy, liquidity, profitability, and asset quality of commercial banks all healthy. The Capital to Risk (Weighted) Assets Ratio (CRAR) stood at 17 per cent, the net interest margin at 3.5 per cent, liquidity at 132 per cent, and the credit-deposit ratio at 78.9 per cent.

Bank credit grew 12.1 per cent in 2024–25, slower than the 16.3 per cent growth in 2023–24, but higher than the decade average of 10.3 per cent.

RBI MPC: Consumer schemes

The RBI will roll out initiatives to improve financial inclusion:

Re-KYC camps: Banks will organise Re-KYC camps at the panchayat level to help customers update their details, open new accounts, and access micro-insurance products.

Settlement process: The central bank also plans to standardise the settlement process for the safety deposit accounts of deceased customers.

RBI Retail: The functionality of RBI Retail will be expanded.