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Informist, Wednesday, Aug. 6, 2025

 

By Pratiksha

 

Since taking over as the governor of the Reserve Bank of India, Sanjay Malhotra has only delivered headlines with his actions and, at times, bombastic statements. These appeared bombastic only because his predecessors, and indeed most central bankers, chose less over more when it comes to communication.

 

But this refreshing bombast was missing from the governor's comments Wednesday, perhaps in line with the lack of monetary policy action by the central bank. Unlike at his first three monetary policy statements, Malhotra's demeanour Wednesday was restrained as he announced his first no-action policy statement.

 

Malhotra, who took charge as RBI's chief in December, has had an eventful run at delivering monetary policy statements so far as the rate-setting panel opted for a total of 100 basis points of rate cuts between February and June. However, the August policy was different as the repo rate was kept unchanged at 5.50% and the stance was retained at 'neutral'.  

 

And with the lack of action, one could evidently see a shift in the governor's demeanour and communication, as he refrained from giving detailed guidance on the future trajectory of interest rates in his statement. In the June policy, he had declared that after the jumbo easing he had unveiled, "monetary policy is left with very limited space to support growth". This policy, he gave a very signature, typical-to-a-governor statement, saying "we will not be found wanting in whatever is required to provide the right balance of price stability and economic growth for the development of our country."

 

When he was directly asked why he had chosen not to give guidance on the future rate trajectory, the governor said the rate decisions will be made on a policy-to-policy basis owing to uncertainty, keeping it as vague as possible.

 

Moreover, in a clear drop in optimism, Malhotra dialled down his aspirational growth target to a more generic "more than 6.5%" as compared to 7-8% in the June press conference. One can, perhaps, attribute Malhotra's measured tone to the prevailing uncertainty on the global front, especially on the US tariffs. "We had already reduced our (GDP) forecast, which was earlier 6.7% to 6.5%. Some of the global uncertainties have already been factored in the revised growth forecast. However, there is still a lot of uncertainty...and it is really very difficult to predict as to what the impact will be (from US tariffs)," Malhotra said. 

 

But at the post-policy conference in June, the governor had spoken at length about how in times of uncertainties, he wanted to give certainty to the markets through monetary policy actions. However, now, when US President Donald Trump is on a rampage about imposing tariffs on Indian exports, which has caused extreme volatility in the foreign exchange market, the governor side-stepped questions seeking a sense of certainty for the markets. 

 

The rupee has been hovering near its record low and has depreciated almost 2.5% against the dollar since the last policy decision, but instead of providing clarity or comfort to the market, the governor only said that the Indian currency could witness some volatility due to global uncertainties.   

 

Malhotra's frank and clear communication was a breath of fresh air. He was very open and vocal about his views on the fiasco related to IndusInd Bank's derivative accounting discrepancy and the subsequent top management exits at the June policy press conference, even while acknowledging that the central bank does not comment on issues relating to individual entities.

 

"They (IndusInd Bank episode) should not bother us too much as long as they are far and few between and limited. I think the bank has taken enough number of steps to improve their accounting and other practices," Malhotra had said in June. 

 

However, this time, he refused to answer any questions related to the same bank, blandly saying he will not answer any questions related to a specific entity.

 

To be sure, the question this time was pointed: Was the RBI considering any action against the promoters of IndusInd Bank or its Board? An answer to this question, no matter how generic, would have deepened market confidence in the regulator and would have done wonders to foster a sense of accountability, particularly given that according to a media report, the bank's former chief executive officer has applied to settle the charge of insider trading by paying a penalty without the admission of guilt.

 

Malhotra's earlier openness in communication was a welcome departure from the usual communication strategy adopted by previous governors and indeed by several central bankers across the world – of speaking less. Now it looks like Malhotra is also moving towards the tried and trodden path. That will be a pity. The economy, and indeed the world, needs more communication and more transparency.  End

 

Edited by Vandana Hingorani 

 

 

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