
Sanjay Malhotra, who became the Governor of the Reserve Bank of India (RBI) in December, will hold his first meeting with the managing directors (MDs) and chief executive officers (CEOs) of public-sector banks (PSBs) and private lenders on Thursday. This interaction is part of the pre-monetary policy consultations, ahead of the RBI’s monetary policy review scheduled for February 5-7.
The meeting will take place in two sessions: in the morning, the RBI Governor will meet with the CEOs of public-sector banks, followed by a session with the heads of private banks after lunch, according to sources.
The February monetary policy review is expected to be significant, as it comes amid slowing economic growth and rising inflation. India’s GDP growth slowed to a two-year low of 5.4% in the July-September quarter. At the same time, inflation, measured by the Consumer Price Index (CPI), was 5.48% in November, and December’s inflation is expected to remain above 5%.
The RBI has kept the policy repo rate unchanged at 6.5% for an extended period after raising it by 250 basis points between May 2022 and February 2023. The stance of the policy was shifted to neutral in the October review. Some market participants expect the central bank to begin cutting rates in the February review.
Issues such as economic growth, liquidity, and deposit mobilization are likely to be discussed during the meeting. Loan growth in the banking sector has slowed recently, with credit growth moderating to 11.4% in the fortnight ending December 27, down from 20.2% in the previous financial year. At the same time, deposit growth has now caught up with loan growth.
Tight liquidity conditions are also a concern, with liquidity in the banking system falling to Rs 2 trillion. This is partly due to the RBI’s intervention in the foreign exchange market, selling dollars to support the rupee. On Friday, the rupee hit a new low of 85.97 against the US dollar, having fallen nearly 3% in 2024.
The RBI had reduced the Cash Reserve Ratio (CRR) by 50 basis points to 4% in the December policy review, releasing Rs 1.16 trillion in primary liquidity. There are calls for further reductions in the CRR requirements to ease liquidity further.
Malhotra has also emphasized the importance of customer service. In his New Year’s message to RBI employees, he stressed the need to prioritize customer centricity and work towards providing seamless, user-friendly services.