India’s strong core can extend goldilocks ride: RBI's Sanjay Malhotra

Reserve Bank of India (RBI) governor Sanjay Malhotra said corporates, banks, central and state governments and the private sector are in robust shape, evidence that the economy is “healthy and robust.” Growth is broad-based in the new-series GDP data and investment has picked up.

Malhotra said in an interview that the economy’s Goldilocks phase can be sustained and interest rates are likely to stay at current levels or go even lower as inflation looks benign. Economists expect a long pause after the policy rate was cut by a cumulative 125 bps to 5.25% between February and December last year, against the backdrop of January headline inflation at 2.75%, well below RBI’s target, and December quarter growth at 7.8% in new series.

Read more: We expect policy rate to be at current level or lower for a long time: Sanjay Malhotra, Governor, RBI


The interview took place before the West Asian conflict began.

“Now, what are the risks? It will depend on the growth-inflation dynamics as they play out. We are still living in very uncertain times,” he said.

He dismissed concerns on rising currency in circulation, noting that “as an economy grows, demand for cash too increases.” He said funding will not constrain UPI expansion.

Malhotra said there is scope to raise credit penetration and the regulator is open to more banks. He added that the Tata Sons application to surrender its upper-layer NBFC classification is “under examination.”

He said overseas inflows have tilted toward markets with AI opportunities and it isn’t reflective of India’s strong fundamentals.

“India is investing across all five layers of AI — energy, chips, infrastructure, LLMs and applications—and adoption is rising,” he said.

On loan recoveries, he advised lenders to act early and stay engaged to maximise value.

He ruled out permitting NBFCs to raise public deposits, citing the absence of deposit insurance and RBI liquidity access, and noted that no shadow lender has applied for a bank licence.

The RBI, he said, remains vigilant when it comes to geopolitics, climate, technology and cybersecurity, while strengthening banks, making doing business easier, and maintaining financial and price stability.