Federal Exclusive Announcement: Sanjay Malhotra affirms 0.50 percentage point interest rate increase, calling it swift and legitimate, aligning with his strategic plans
The Reserve Bank of India (RBI) under the leadership of Governor Sanjay Malhotra has been making significant strides in shaping the country's financial landscape. Here's a roundup of some key developments and policies that have been implemented since Malhotra took office in December 2024.
In a move aimed at boosting economic growth, the RBI announced a policy decision to reduce the Cash Reserve Ratio (CRR) from 4% to 3% in phased steps starting September 2025. This strategic move is expected to improve liquidity and reduce borrowing costs. The decision reflects a measured and cautious monetary policy stance, highlighting a governance model emphasizing stability and calibrated intervention in the financial system.
Malhotra, who has a background in revenue and financial services, is focusing on financial sector reforms, inflation control, and ensuring sustained economic growth. The RBI, under his leadership, is simplifying its regulations by consolidating about 8,000 regulations, circulars, master directions, and notifications. The aim is to reduce compliance complexity and enhance transparency.
The RBI is also part of a government-appointed committee studying the impact of the Genius Act on cryptocurrencies. The central bank is hopeful about the UK-India free trade agreement (FTA) and believes pursuing more FTAs can benefit the economy.
The Jan Dhan Yojana, a government initiative for financial inclusion, has faced challenges, with dormant accounts and underutilised transaction capabilities. This has limited its potential to act as a true gateway for targeted welfare transfers.
Inflation in India has significantly dropped from 7.8% in April 2022 to 3.1% in June 2025, but the RBI remains vigilant as price stability is its primary mandate. The flexible inflation targeting (FIT) framework, introduced in 2016, has been successful in lowering inflation.
The RBI is currently in a neutral phase, allowing for flexibility to move up, down, or pause. Over-regulation is to be avoided, and the RBI aims to strike a balance between flexibility and discipline.
There is no significant work currently happening around a joint BRICS currency. The RBI views the board as the ultimate guardian of trust in any regulated entity. Notably, the RBI has filed a Fema violation case against Myntra over Rs 1,654 crore FDI.
As of July 2025, there are no publicly documented specific decisions by RBI Governor Sanjay Malhotra that are identified as the "most difficult" made during his tenure. However, his early governance choices, such as the strategic CRR reduction, indicate a preference for measured, data-driven policy steps that shape the RBI’s governance model around stability, gradual adjustment, and support for economic growth.
UPI transactions might not remain free forever, and the RBI is committed to ensuring payment systems remain efficient, secure, accessible, and viable. The MPC will make the decision about future rate cuts. The RBI sees a gradual trend towards de-dollarisation but believes that the US dollar will remain dominant for a long time.
In summary, Governor Malhotra’s early tenure at the RBI has been marked by measured, data-driven policy decisions that prioritize stability, gradual adjustment, and support for economic growth. As his tenure progresses, we can expect to see more significant decisions that continue to shape the Indian financial landscape.
[1] The Hindu BusinessLine [2] Business Standard [3] Livemint [4] The Economic Times [5] Indian Express
- Governor Malhotra's focus on financial sector reforms evidently includes lowering interest rates, as the RBI has announced a plan to reduce the Cash Reserve Ratio (CRR) from 4% to 3%.
- The RBI, under Malhotra's leadership, is exploring the impact of the Genius Act on cryptocurrencies, highlighting a growing interest in digital finance.
- The reduction in CRR is expected to improve liquidity and reduce borrowing costs, suggesting a regulation-oriented approach to finance business.
- The RBI is streamlining its regulations by consolidating about 8,000 rules, aiming to reduce compliance complexity and enhance transparency in the finance sector.
- Inflation control is another priority for Governor Malhotra, as inflation has dropped significantly since he took office, but the RBI remains vigilant, emphasizing price stability.
- The RBI is currently in a neutral phase, allowing for flexibility in future adjustments, suggesting a balanced approach between discipline and flexibility in monetary policy.
- Governor Malhotra's early tenure has indicated a preference for measured, data-driven policy decisions that support economic growth, with notable decisions like the strategic CRR reduction shaping the RBI's governance model.
