Cash, profits of Indian companies will be strong, fast growth will continue: RBI Governor Malhotra said – impact of US tariffs is minor, no proposal to recognize crypto

If the government brings a plan for merger of banks, RBI will fully support it. This will be in the interest of a strong banking system. In a country like India, banks can be big and can also be in large numbers. Banking services can improve with this merger plan. Bigger banks have lower costs. Due to this, they can also offer cheaper loans.

Such banks are capable of providing more and better facilities. Due to greater resources, their reach is also better than smaller banks. They are more able to withstand domestic and external economic shocks. But this does not mean that small banks have become irrelevant. In a country like India, the importance of small banks will always remain.

Special conversation of RBI Governor Sanjay Malhotra with Bhaskar…

Question-1: Retail inflation rate has remained only 0.25%. This is below RBI’s 4% target. Is there scope for cutting interest rates?

answer: The reduction in inflation is the result of falling prices of food items. If the impact of decline in prices of vegetables and grains is removed, core inflation is around 4%, to which precious metals contribute to some extent. However, the inflation of the coming months is more important for determining the policy rate because the effect of monetary policy takes time.

Our estimate is that inflation will increase from these lower levels next year but will remain under control. As far as policy rate decisions are concerned, it is for the MPC to take the decision keeping in mind the emerging macroeconomic conditions and scenario. However, in the last meeting the MPC had talked about having policy space.

Question-2: Rupee has slipped to a low of 88 against the dollar, how do we see this?

answer: Our approach has consistently been to let the market decide the value of the rupee. RBI does not target any level or price band. Our goal is to minimize extreme fluctuations. We will continue to follow this policy.

Broadly speaking, the average depreciation of rupee against the dollar every year has been 3-3.5%, but in the last 8 months it has been 4.6%. This is definitely a bit high, but this is due to external reasons like tariffs, geopolitics.

Question-3: Many countries including America are adopting crypto, are you considering it?

answer: The policies of a country like India are not decided by the policies of other countries. There is no proposal yet to recognize cryptocurrencies as currency. The stance of the Reserve Bank of India regarding crypto still remains cautious. In this matter, we remain strongly in favor of promoting Central Bank Digital Currency (CBDC).

Question-4: Unemployment is increasing, profits of manufacturing companies are in minus. Is RBI taking any concrete steps?

answer: Our responsibility is to maintain price stability, which also takes into account economic growth. We have taken many measures to support the economy (like cutting repo rates to increase consumption, increasing liquidity in the market), which are having a positive impact on the economy and employment.

According to the Periodic Labor Force Survey data, the unemployment rate is expected to decline to 3.2% in 2023-24 from 6% in 2017-18. The unemployment rate came down to 5.2% in July-September this year, which was 5.4% in April-June.

Question-5: Lakhs of crores become NPA in banks. Common people’s money is used to save them. Will RBI fix accountability?

answer: Some portion of the loan becoming NPA is a part of any lending activity. Asset quality has improved significantly in recent years. Gross NPA (GNPA) to reduce to 2.3% and net NPA to 0.5% by March 2025.

In March 2018, these were 11.2% and 5.96% respectively. The resolution framework established since then aims to ensure that any stress on loan assets is addressed in a timely and effective manner.

Question-6: You will complete one year as Governor in December. How challenging was this journey?

answer: When I assumed responsibility, the trade and economic policies of the new administration in America were taking shape. The world was moving towards a more multi-polar and fragmented system than before. Geopolitical tensions were disrupting supply chains, especially for crude oil, leading to rising inflationary pressures.

Shipping problems in the Red Sea route were increasing India’s trade deficit. Some of these risks still exist, but the uncertainties have reduced. This includes trade agreements between many countries including China and the US and the calming down of the Middle East conflict.

During this period, despite global challenges, the Indian economy not only stood strong but also continued growing with the help of strong domestic demand and policy support. But there were external shocks, due to which the Reserve Bank took several steps to protect the economy.

Maintaining a large buffer of foreign exchange reserves. 1% cut in repo rate. These include providing adequate liquidity to banks and reducing their cash reserve ratio, so that they can give more loans. We strengthened macroprudential norms to maintain the stability of the financial system.

Question-7: Private investment and global demand are sluggish. In such a situation, how realistic is the target of 7-8% growth rate in 2025-26?

answer: Despite global uncertainties, Indian companies entered the current financial year with strong balance sheets, cash and profits. As far as monetary policy is concerned, RBI is keeping an eye on the upcoming data. But our focus will always be on keeping prices stable while supporting the country’s economic growth.

We have also taken some policy initiatives. In October, it announced a package of regulatory measures that will help strengthen the Indian banking sector, enhance competitiveness, improve loan delivery, ease of doing business and increase consumer satisfaction.

In the last 4 years, our economy has grown at an average of 8.2% annually. We are confident that the economic growth rate will remain strong in the future also. This year the growth rate is estimated to be 6.8%.

Question-8: Profits of banks are at record level, but EMI of common people is increasing. Is the gap between banks and the public increasing?

answer: Ten years ago the average interest rate was 10.77%, but now it is 8.5%. Even in the last 9 months it has decreased by 0.83%. It is RBI’s constant endeavor to provide loans to borrowers at reasonable interest rates. Besides, efforts are made to give appropriate interest to savers and depositors.

However, if you look at the return on equity, the profits of banks are not more than companies in other sectors. I would like to say that most of the profits are used in expanding banking activities.

Question-9: America has imposed 50% tariff. Current account deficit and pressure on the rupee may increase. What are you doing in such a situation?

answer: The increased tariffs in the US will have a marginal impact on our current account deficit (CAD). India’s external sector is strong. CAD declined to $2.4 billion (0.2% of GDP) in the first quarter (April-June) of 2025-26. In comparison, in the first quarter of 2024-25 it was $ 8.6 billion (0.9% of GDP).

Despite deficit in import-export, this success was achieved due to increased services surplus and strong remittances (money sent home by Indians working in other countries). Additionally, India’s foreign exchange reserves remain strong at around $690 billion (as of October 31, 2025).