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Informist, Wednesday, Oct. 15, 2025

 

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--RBI Malhotra: CBDC is the answer for cross-border payments 
--CONTEXT: RBI Governor Malhotra speaking at an IMF event 
--RBI Malhotra: Don't need CBDC, stablecoins for local payments in India 
--RBI Malhotra: Urge other central bankers to promote CBDCs 
--RBI Malhotra: Fisc, monetary policy coordination key in bringing down CPI 
--RBI Malhotra: Promote CBDC as crypto has huge monetary policy implication 
--RBI Malhotra: India equities, rupee correcting from 2024 outperformance 
--RBI Malhotra: No implication of any gold prices depreciation for India 
--RBI Malhotra:Aiming for structural reforms to attract durable capital flow 
--RBI Malhotra: See upside to growth if US tariffs lowered
--RBI Malhotra: US tariffs not a matter of huge concern for India
 

 

NEW DELHI – Reserve Bank of India Governor Sanjay Malhotra expects an upside to India's GDP growth forecast if there is an early resolution to the India-US trade deal negotiations, which could soften the current tariff blow from Washington. India currently faces the heat of US' 25% reciprocal tariffs, with another 25% punitive tariff for having economic relationship with Russia. 

 

"India is mostly domestic driven economy, so while we are impacted by the higher tariffs, it is not a matter of huge concern," Malhotra said at an International Monetary Fund event Wednesday. "India's GDP growth of 6.8% is much below our aspirational levels of growth for Viksit Bharat 2047 so it does impact but yes, there will be an upside if we are able to have an early resolution to the tariffs," Malhotra said. 

 

New Delhi is engaged in talks with Washington for a trade deal, with the two sides having so far held five rounds of negotiations. Currently, India's team is visiting the US for a round of discussion. Malhotra said he had a brief meeting with the team over breakfast earlier in the day. 

 

The central bank on Oct. 1 raised its GDP growth projection for 2025-26 (Apr-Mar) to 6.8% from 6.5% projected earlier, drawing comfort from the 7.8% GDP print for Apr-Jun, which was a surprise on the upside, Malhotra had mentioned in his policy statement. 

 

The course of trade negotiations between India and the US has seen considerable ebb and flow in the past seven months, with the two sides hitting a stalemate in August over disagreements on the farm sector. The negotiations resumed in September. But with the US government shutdown, the future course of talks remains uncertain. The US tariffs have cast a shadow on over $50 billion of Indian exports from labour-intensive sectors like textiles, gems and jewellery, marine products, and furniture and bedding. In FY25, India had exported $86.51 billion worth of goods to the US and had a trade surplus of $40.82 billion with the country. 

 

From a monetary policy perspective, the central bank has said that it is committed to supporting domestic growth, given the benign inflation scenario. Anchoring inflation, Malhotra said Wednesday, was possible due to coordinated monetary and fiscal measures. The government's supply-side measures have helped in bringing down food inflation below the tolerance band, Malhotra said at the IMF event. Food inflation has troubled the central bank for far too long, and is expected to be benign going forward.

Speaking about emerging economies and the volatility in capital markets due to exogenous factors, the governor said that both the Indian rupee and the equities market are correcting from the outperformance that was seen in 2024 and the RBI continues to maintain its stance that markets should decide what the levels should be. 

 

Ever since Malhotra took charge as the RBI governor in December, the rupee has seen excessive swings on both sides, instilling a sense in the market that the central bank will be hands-off in its approach to intervention. However, in the recent past, the RBI has intervened strongly in the currency market, catching traders off guard. 

 

"With more and more countries being inward looking, and global growth being subdued... still much below pre-pandemic levels, what it means for us is to look structurally, how to improve our own competitiveness, (and) productivity, so that we are not only able to expand and diversify exports, but also are able to get some good, durable capital inflows," Malhotra said. "That's what is going to decide how rupee, or local currency is going to actually behave," the central bank governor said. 

 

Speaking about reserves and the sharp rise in gold prices, Malhotra said that India's foreign exchange reserves have a diversified basket and should gold prices exhibit volatility, falling off the current highs, it will not have any implication for India. Futures contracts of gold on the Multi Commodity Exchange of India rose to a fresh record high Wednesday, tracking gains on the COMEX. Both gold and silver prices have rallied more than 40% so far this year, with gold prices touching a record high of INR 127,740 per 10 grams earlier in the day. 

CROSS-BORDER, CBDC 

The RBI governor said that central bank digital currency is the answer to cross-border payments going forward, although more countries need to join the club to make it a success. India is currently running pilots for both retail and wholesale central bank digital currencies. "Retail level, so that it can be used as cash, as currency and at wholesale level, to test settlement among the banks," Malhotra said on CBDC. 

"For us in India, domestic payments is not an issue, so to that extent we do not need CBDC or a stablecoin for local payments, we have a very efficient payment system," he said. Urging other central bankers to also promote it, Malhotra said,"Unless other countries also adopt CBDC, we are not going to see the benefits in so far as cross-border settlement is concerned."

 

India promotes central bank digital currency over cryptocurrencies, as the latter has huge implications for monetary policy, for controls on capital accounts, and money laundering, Malhotra said.  End

 

Reported by Priyasmita Dutta

Edited by Tanima Banerjee

 

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