Governor Sanjay Malhotra Highlights Inflation Control and Economic Growth
Mumbai: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday announced a 25 basis points cut in the repo rate, bringing it down to 6.25%. The decision was made by the six-member MPC to provide economic support while maintaining a neutral stance on monetary policy.
RBI Governor Sanjay Malhotra stated that the central bank remains focused on controlling inflation while ensuring economic growth. He emphasized that inflation has been declining and is expected to further align with the RBI’s target.
RBI’s Focus on Liquidity and Growth
The RBI has committed to maintaining sufficient liquidity in the banking system to support credit growth. Malhotra assured that the central bank would take necessary steps to ensure durable liquidity, helping businesses and consumers access financial resources easily.
In addition, he noted that rural demand has already begun to recover, and the overall growth momentum in the Indian economy is expected to strengthen in the coming months. However, global uncertainties in trade and climate change risks remain potential challenges to economic stability.
Rupee Stability and Inflation Management
The RBI is also closely monitoring the exchange rate of the rupee, ensuring that it remains stable amid global currency fluctuations. Malhotra reaffirmed the central bank’s commitment to taking necessary measures to manage inflation and maintain financial stability.
What is Repo Rate?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks when they need short-term funds. It is an essential tool for controlling inflation and liquidity in the economy.
- Lower Repo Rate: Encourages banks to borrow more from the RBI, increasing liquidity and boosting economic activity.
- Higher Repo Rate: Makes borrowing more expensive, reducing money supply and helping control inflation.
The repo rate is a crucial element of monetary policy, influencing loan interest rates, investment decisions, and overall economic growth. The latest cut to 6.25% is expected to boost lending, support businesses, and drive economic expansion.
Conclusion
The repo rate cut signals the RBI’s intent to support economic growth while keeping inflation in check. As the global economic landscape remains uncertain, the central bank’s policy decisions will be critical in maintaining India’s financial stability and growth momentum.
