RBI to maintain low interest rates for long period of time: What Governor Sanjay Malhotra said on future cuts

Reserve Bank Governor Sanjay Malhotra on Friday said that key policy rates will remain at low levels for an extended period, and the central bank remains open to cut rates further if needed, PTI reported.

The statement, hinting at what lies ahead, comes shortly after the lender decided to keep the repo rate unchanged at 5.25% and retain the neutral stance at its bi-monthly monetary policy meeting.

“The policy rates will continue to be at low levels for a long period of time (and) they will go down even further,” Malhotra said in a post-monetary press conference.

However, he also noted that the decision on interest rates will be taken by the Monetary Policy Committee (MPC), which will base its call on evolving macroeconomic conditions, guided by the new series of GDP and inflation data.

The governor said policy transmission on the deposit side has been slower and interest rates on fixed deposits will be going down, the agency reported.

Several financial experts said that the RBI’s policy reflects confidence in India’s domestic growth momentum, while maintaining caution on inflation and global uncertainties. “The continued focus on market deepening and credit availability is structurally positive for financial markets,” said Bajaj Broking Research.

Earlier, the RBI upwardly revised the GDP forecast for the first and second quarters of the next fiscal year, the agency report said.

At the press conference, Deputy Governor T Rabi Sankar said the RBI will be able to manage the government borrowing programme comfortably.

The government's gross borrowing has been pegged at ₹17.2 lakh crore during the next fiscal year, while net borrowing was ₹11.73 lakh crore. Malhotra added that Treasury Bills or T-bills will help manage the yield curve and the government would be able to raise net borrowing of ₹11.73 lakh crore at a reasonable rate.

Commenting on the Budget's announcement regarding data centre push, he said it is likely to bring in substantial foreign investments. In response to another question, Malhotra also noted that currency in circulation has increased quite a lot in the last one year.