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Informist, Wednesday, Oct. 1, 2025

 

MUMBAI - Following are the highlights of Reserve Bank of India Governor Sanjay Malhotra's statement on Wednesday after the fourth bi-monthly meeting of the Monetary Policy Committee for 2025-26 (Apr-Mar):

 

KEY TAKEAWAYS

* MPC left repo rate unchanged at 5.50%
* MPC unanimously voted to keep repo rate unch at 5.50%
* MSF, Bank rates remain unchanged at 5.75%; SDF rate at 5.25%
* Policy stance remains 'neutral'
* MPC Kumar, Singh were of view policy stance should be accommodative
* RBI Malhotra describes Feb-Aug as easing cycle so far
* Minutes of Oct MPC meeting to be released on Oct 15
 

MACROECONOMY 

* Growth-inflation narrative altered since Aug MPC
* Fast changing global scene altered growth-inflation dynamics
* Tariffs will moderate exports
* Global econonmy more resilient than expected
* Outlook remains clouded amid elevated policy uncertainty
* Global fincl mkts have been volatile
* GST reforms partially offset trade related headwinds
* Impact of front-loaded policy actions, fiscal measures playing out
* MPC noted impact of earlier rate cuts still playing out
* MPC considered it prudent to wait for policy steps to play out
* Econ activity remains resilient
* Domestic econ activity continues to sustain momentum in Q2
* Kharif sowing, adequate reservoir levels boosted rural demand
* Svcs sector buoyancy, steady employment to boost demand
* Domestic demand should continue to facilitate fixed invest
* Tariff, trade related uncertainties to impact demand
* Govt policy steps may offset some impact of global headwinds
* Indian econ poised to register high growth despite headwinds
* Sobering inflation gave MPC room to support growth
* Need fisc, monetary, regulatory support for Viksit Bharat aims
* Progress of southwest monsoon satisfactory
* Healthy kharif sowing should keep food prices benign
 

INFLATION

* See FY26 CPI inflation at 2.6%
* Cuts FY26 CPI inflation forecast to 2.6% from 3.1%  earlier
* Cuts Jul-Sept CPI inflation forecast to 1.8% from 2.1%  earlier
* Cuts Oct-Dec CPI inflation forecast to 1.8% from 3.1%  earlier
* Cuts Jan-Mar CPI inflation forecast to 4.0% from 4.4%  earlier
* Cuts Apr-Jun FY27 CPI inflation forecast to 4.5% from 4.9%
* Headline CPI in Q4 FY26, Q1 FY27 broadly in line with aim
* Risks to inflation forecasts are evenly balanced
* Low inflation due to sharp fall in food inflation
* GST reforms to reduce prices of several items of CPI basket
* Inflation outcome likely to be softer than Aug projections
* Considerable moderation in headline inflation
* GST rationalisation to bring down CPI
* Inflation remained above expected target in some economies
* MPC observed overall inflation outlook more benign
* Inflation outlook more benign on low food prices, GST rejig
* Core inflation this year, next year to remain contained
* Inflation conditions remain benign so far in FY26
* Actual CPI inflation well below our forecasts so far
* Inflation weighed by sharp fall in food prices
* Core inflation largely contained Aug

GROWTH

* FY26 GDP growth projections revised upward
* Hikes FY26 GDP growth forecast to 6.8% from 6.5%
* Hikes Jul-Sept GDP growth forecast to 7.0% from 6.7%  earlier
* Cuts Oct-Dec GDP growth forecast to 6.4% from 6.6%  earlier
* Cuts Jan-Mar GDP growth forecast to 6.2% from 6.3%  earlier
* Cuts Apr-Jun FY27 GDP growth estimate to 6.4% from 6.6%  earlier
* MPC noted growth outlook resilient despite weak demand
* Growth continues to remain below aspirations
* Trade-related headwinds to weigh on growth Q3, Q4
* Opened up policy space to further support growth
* Real GDP growth surprised to the upside in Q1
* Global factors pose downside risks to growth outlook

EXTERNAL SECTOR

* India's svcs exports showed robust growth in Jul-Aug
* Robust services exports to keep CAD sustainable FY26
* Net FDI was at 38-month high in July
* High remittances to keep CAD sustainable FY26
* FX reserves on Sept 26 at $700.2 bln   
* FX reserves enough to cover more than 11 months' imports
 

FINANCIAL SECTOR

* Rupee witnessed some depreciation, keeping close watch
* Will take appropriate steps on rupee as warranted
* Keeping a close watch on rupee movement
* LAF daily surplus averaged INR 2.1 tln since Aug MPC
* CRR cut, govt spending to aid liquidity in coming days
* Drawing down of govt cash balance, CRR cut will aid liquidity
* Will anchor short-term rates through 2-way liquidity ops
* Will actively manage liquidity through two-way ops
* Money mkt rates stable amid comfortable liquidity condition
* Transmission of monetary policy has been broad-based
* System-level parameters on NBFCs' fincl stability healthy
* Credit growth remains healthy, supportive of real econ
* Overall flow of resources to econ needs to be watched closely
* Non-bank sources of funding gaining prominence
* Announces 22 additional measures
* To simplify FX mgmt
* To take steps on internationalisation of rupee
* ECL framework is proposed to be made applicable to banks
* ECL framework for banks to be effective Apr. 1, 2027
* ECL framework for bks to have glide path of nearly 5 years
* Draft for standardised credit risk approach to be announced
* Basel-III capital adequacy norms to be effective Apr 1, 2027
* New norms to cut banks' capital need for MSME, home loans
* Mkt-related risk norms under Basel-III still under consultation
* To remove restrictions on group entity activity overlap
* Propose to introduce risk-based deposit insurance premium
* To remove regulatory ceiling on lending of listed debt securities
* Moot removing regulatory ceiling on lending against listed debt
* To remove ceiling on lending against listed debt securities
* To reduce risk weights on NBFC lending to high-quality infra
* Have been taking number of measures on ease of doing business
* To publish discussion paper on licensing new urban co-op banks
* Consolidated 9,000 regulations; draft ready, to be issued soon
* Restrictions on collection accts proposed to be removed
* To increase period of FX outlay on merchant trades to 6 mos
* FX account repatriation raised to 3 mos from 1 month for exporters
* Propose to rationalise FEMA norms on NRI business in India
* To strengthen internal ombudsman mechanism
* Levy of minimum account balance to apply to digital accounts
* Improving RBI ombudsman scheme to enhance grievance redressal
* To add regional rural banks to RBI ombudsman scheme
* To bring rural co-op banks under RBI ombudsman scheme
* To make FX exchange rates transparent for more rupee trade
* Permit wider use of special vostro balances in corp bonds
* Establish transparent reference rate for major trading partners
* To allow rupee loans for trade with Sri Lanka, Bhutan, Nepal

MISCELLANEOUS
* To be proactive, consistent in messaging
* To back up clear communication with actions
* Remain vigilant of incoming data

 

End

 

US$1 = INR 88.69

 

Compiled by Vinod Bhovad

Filed by Vandana Hingorani

 

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