MUMBAI: Reserve Bank of India Governor Sanjay Malhotra on Monday said it was “too early” to talk about raising interest rates, running counter to market expectations that have begun pricing in monetary policy tightening.
He stressed that the central bank has not issued such a signal and remains strongly dependent on the data amid continuing global uncertainty.In an interview with ET Now, Malhotra said the RBI’s current stance should not be interpreted as a precursor to higher interest rates. “If we had wanted to signal a rate hike, we would have shifted the stance from neutral to restrictive,” he added, adding that in light of the growing uncertainty, “it is too early to discuss a rate hike.”The governor noted that the easing of tensions in West Asia has brought some relief to the global economy, especially through lower crude oil prices. This supports growth and moderate inflation in India, which has strong economic ties with the region, he said.
But he warned that the situation is still fragile. “It will take time to restore supply, inventories need to rebuild, and demand may come back,” he said, adding that the RBI is in a “wait and watch mode” as uncertainty persists.
Regarding inflation, Malhotra said there are no clear signs yet of second-round effects. Headline inflation remains below the Reserve Bank of India’s 4% target, largely driven by food prices, while core inflation remains subdued at around 2.4%.Wholesale inflation has risen, mainly due to fuel, but the central bank is closely tracking whether these pressures are spreading more widely. “If price increases become widespread and persist, policy action will be warranted.
“At the present time, we do not see such a generalization,” he said.Reiterating the Reserve Bank of India’s stance on the currency, Malhotra said that the rupee is market-determined, with intervention limited to curbing excessive volatility. He noted that the recent measures helped ensure orderly market movements and reduce speculative pressures. On capital flows, he said initiatives such as FCNR deposits and external commercial loans (ECBs) have seen encouraging initial responses, with expectations of continued resilience in the offshore sector.Malhotra also outlined the RBI’s ongoing efforts to deepen digital financial infrastructure. He said the central bank is working to make the BHIM app interoperable with digital rupee wallets, a move aimed at improving user convenience and accelerating the adoption of central bank digital currency (CBDC).On technology, he noted that the RBI is actively exploring the use of artificial intelligence to enhance regulatory oversight, improve efficiency, and strengthen financial stability frameworks. “We use artificial intelligence in our daily work. We have our own language model ChiRAG (Chat Interface with Retrieval Augmented Generation).” ChiRAG is a tool to help RBI staff retrieve, synthesize and analyze information from the central bank’s internal data and documents.