RBI policy press conference: Here's everything that came up for discussion

Friday's monetary policy press conference by Reserve Bank of India (RBI) Governor Sanjay Malhotra touched every possible gamut of the world's fastest-expanding major economy, which is looking beyond the hype of AI to underscore its diversity that would draw investor funds through business cycles.

Here, below, are the topic areas that came up during discussions with the media on a day Mint Road announced a raft of measures, including a bespoke NRI deposit program, to draw in deposits. The proof of the pudding? The rupee outshone all Asia-Pac peers to climb 84 paise to end at 94.95 against the dollar.

Measures to draw in dollars

The details we will come out to them shortly, we are still working out the details but broadly the contours were already mentioned, in terms of CRR and SLR that dispensation will certainly be given, other than that I don't think there is any change in the regulatory dispensation, so that whatever is I mean, whatever is the existing dispensation regulation with regard to that, there is no special dispensation for that.

In terms of the quantum, we are hopeful of reasonable and could be, we are not targeting any particular amount but we do expect healthy flows, both from ECB and other various measures have been announced today. So as a result of all these measures, we expect healthy flows, not only in this period of 3 to 4 months that we have given short window for ECB, ZFC and RB deposits but there have been other measures for equity as well as government bonds for put together, and there were other measures which were taken even earlier, whether it is in terms of the ECB liberalised ECB scheme that we brought in and the measures that I mentioned in my multi policy statement with reg ard to government initiatives in terms of the trade agreements etc. All those put together, we are quite confident of very healthy, a much better, a much better view this year as compared to what it would have been otherwise.

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Growth vs inflation

It is a target which is sacrosanct for us. It is a target which the government has given to us. It was reviewed. It remains 4% and that is what our endeavour is. But keep in mind that this target is to be met over a period. It is a long, it is medium term kind of a target and it is not advisable to take action for each and every small or large, especially small deviations from the target because that can have consequences which can be disproportionate for growth.Our target remains the same. It is 4%. It is to be met over a period of time and as mentioned, we will be data dependent. We have to watch and see as to whether this shock, because it is a supply shock, whether its effect is going to persist or whether it is going to wane away. So we are watching for that and I think the details are already there in my policy statement. We will be very watchful if inflation is getting generalised, building into expectations and accordingly take action. The concern is the real rate is now very, very small or even negative. As I mentioned to you, we have to look at it over a little longer period. It is not possible nor is it desirable. It is neither possible nor is it advisable to have it pegged in a very small range and that is why we have this range. The range of 2 to 6% is primarily for this purpose that while the endeavour, the focus, the target is 4%, but there can be fluctuations around that and if they are really fluctuations, then we do not and the effect of inflation is coming down on its own then we do not apply monetary policy tools which will have other adverse consequences. Thank you. In the interest of everyone's time, let us restrict ourselves to one question at a time and then if there is time. And the question has not been asked by anyone else, then we come back. Okay.

On whether rupee is undervalued

So I have never said that rupee is undervalued. I think what you are referring to is the fact that I mentioned that, , it may be, I think if I recall correctly, I said something to the effect that it is reasonable to think that it may not be overvalued.

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And some people, of course, , do say that it is, when they look at, read etc., then they do say that it is undervalued. So this is what I said. I never said that it is undervalued. But by some accounts, yes, it is undervalued. So what could be the fair value if you have done it? See, we thought, we don't have, , as mentioned, our policy has been consistent. This question keeps coming up again and again.

And we keep giving out the same answer. I don't have anything more to add than what I said in my monetary policy statement.

On competition for deposits

On NRI Deposits FCNR (B) and Gold Monetization Scheme

On State of Economy

It is not of any major country. And as far as currency is concerned, it will definitely increase. Because if oil prices have increased, then they are increasing everywhere. But we can only hope that it does not remain for a long time. There is a lot of uncertainty. We will find out after that.

But our currency situation is very good. Our growth is good. Our banks are capable. Our corporate world, their balance sheets are very healthy. As far as foreign currency is concerned, we have sufficient forex reserves. And we have enough to cover our goods for the next 11 months.

Overall, we are in a very good position. And we are very confident that we will not only deal with this situation well, but we will consider this situation as an opportunity for us. And we will make ourselves more capable and improved so that we can deal with such crises and shocks in a better way.

Yes, I do expect them to pass on some of the benefits of hedging. And that will result in good flows.

On Liquidity and Banks Passing on Hedging Costs

There is no level that we generally target. You have seen, we gave about 2.6 lakh crores of liquidity in the last two months since we have met. And we will continue to provide appropriate liquidity as is needed.

Measures to stop capital outflows

So that is the primary source through which we get the data. And other than inflation expectations, the prices, when they are passed on, that can also have some element of expectations built into it, apart from the surveys that we do. We monitor those very closely and we will continue to do that.

On UL-NBFCs and large banks

On Oil Prices Assumptions and Measures to Curb Currency Speculation

On differential interest rates

On why concessional ECB restricted to PSUs

On Raising Rates to Draw Dollars

On the Next Policy Rate Hike

On Private Capex and FDI Slowdown

So I can add to the overall situation of capital flows as well as capital investment in the country as Sir said, private capital formation numbers actually have been very healthy. Investment to GDP ratio has been turning upwards, so those numbers remain healthy, more can certainly happen. If we look at the BOP sign, gross FDI flows were $95 billion in 2025-26, can be much more this year for all we know, certainly top 100 billion can go up to 110, 120 if not more and it's a secular increase which means it's not a story that we can pin down to only one year, there are years coming which we'll see even healthier inflows of gross FDI and with the measures that have been announced we are looking at and projecting a very healthy BOP going forward.

The net still remains negative, FDI? So we do not have projections for this year and that remains to be seen on how things pan out. Net FDI is also a combination of globally how things are and those are things that get settled over a period of time but one can talk more confidently today about the gross FDI numbers which are looking very healthy. Net FDI was also positive, it was not negative, 6.7 or so last year and April numbers, gross FDI is 15 billion and net is also about 7 or 8 billion if I remember correctly, that's also positive.

So 15 billion in one month is a very high number, we don't have the monthly figures, a lot of it was to do with the financial sector, so we are confident as DG has mentioned.

Poonam Gupta: So I can add to the overall situation of capital growth as well as capital investment in the country. As sir said, private capital formation numbers actually have been very healthy. Investment to GDP ratio has been falling upwards. So those numbers remain healthy. More can certainly happen. If you look at the VOB side, gross FDI inflows were $95 million in 25-26, can be much more this year, for all we know. Certainly top $100 billion can go up to, , $110-120, if not more. And it's a secular increase, which means it's not a story that we can pin down to only one year, . There are years coming which will see even healthier inflows of gross FDI. As the measures that have been announced, we are looking at them projecting a very healthy growth. So we do not have projections for this year, and that remains to be seen on how things pan out. Net FDI is also a combination of, , globally how things are. And those are, , things that get settled over a period of time. But one can talk more confidently today about the gross FDI numbers, which are looking very well. Net FDI was also positive. It was not negative, 6.7 last year. And April numbers, gross FDI is 15 billion, and net is also about 7 or 8 billion, if I remember correctly. That's also positive. So 15 billion in one month is a very high number. We don't have the monthly figures. A lot of it was due to the financial sector. So we are confident, as the GDP also mentioned.

On ATMs Lacking Currency

On Impact of Measures on Flows and Rural Demand

On RBI Trading Gold

On Uncertainty

See the primary, the major risk today is concern or uncertainty is how long these supply disruptions continue and what impact they have on prices. And availability is as of now not so much of a concern. It is more as of now it is price. So that is what we are looking for as to how long that remains. That I think is number one. After that it will be the monsoons, the El Nino and other things.

On Transmission Efficiency

On Curbing Rupee Speculation

On Fertiliser Prices and Availability

That is my understanding of fertilizers because if there is less rainfall, then you cannot apply. That is my understanding of the issue. So, but there is sufficient, nevertheless, there is sufficient fertilizer stock with the government.

On Real interest Rate

On Mythos Access

DG: Just to supplement on that, this is a item that has been engaging our attention both at the government level and at the financial sector inter-regulatory forum level. And as you mentioned, India has been included as one of the countries that will be part of this project with select corporates and financial entities having access to the project.

But the details of which are still fully awaited. And once this opportunity opens up, how exactly to make use of it in consultation with government and with other regulators, we will take further steps. But in the meantime, in terms of getting the preparedness for the regulated entities, we have issued the required advisories.

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We will be data-dependent and we will see how the growth inflation dynamics plays out as I have already mentioned. I think on rates, policy rates going forward, I will not be able to give you more guidance than what was given in the statement and what I mentioned when I answered one of the previous questions. Competition as far as, I mean, competition is healthy. Competition is good. As long as it is transparent, as long as it is fair, competition is good. And that should continue. So, first I said that we have not set any target for this. But we hope that in a very healthy and large amount, we should be able to get the flows within the measures that we have announced today. Secondly, there is no proposal for gold monetization yet. Look, our economic situation, as we have said at our time, is very good, very capable, healthy. India is not alone in this global shock. All countries are impacted by this. As far as India is concerned, we are not only compared to other countries, but we are in a much better position from both perspectives. Whether it is our economic growth, which is more than 6.5%, it is of very few countries. It is not of anyone. Liquidity, as I have mentioned, will provide the appropriate amount of liquidity so that creditin the system, not only bank credit, but other bonds, etc., can be provided to meet the needs of the economy. First of all, there is no such measure right now under consideration to restrict any kind of capital outflows. On your second question, which is related to inflation expectations, we do our household surveys. You are aware we don't answer any entity or bank-specific questions. We are looking at system-level things. So, that's on your second part of the question. The Upper Layer of NBFCs - see, the list is there already. So, it continues till the time we have a new list. When will we have it? Suppose it gets updated on a yearly basis, that's what I am asking. So, we will do it shortly. No, there are no specific measures. But as I have mentioned, in case they are required, especially to curb speculative kind of a behavior, then we will take them in case they are required. Assumption for crude is $95 to a barrel. So, it's changed from our previous assumption and that is one of the reasons why projected inflation is higher. I think you are referring to some individual specific instance, bank, which we don't comment on. However, as I have mentioned, I think perhaps now I, , earlier question, I think they are too connected, that they are connected. So, , we have a very consistent and a very clear policy for deposits as to when they can have differential rates. I think for certain categories of people like, , senior citizens depending on, and then, , depending on tenor and things like that, , you can have differential rates. I'll ask one of my colleagues, , to tell you on what basis you can have differential rates. But they have to be transparent at the same time. You have to display them to everyone clearly.And any differential rate beyond that is certainly, if someone is giving, is certainly not acceptable. The public sector entities are a special category. And they are more in areas where the needs of the economy are more. And the benefits are also, , passed on to the general public because they are catering more, , to public utilities, infrastructure. So the benefits go to a much larger section of society when we restrict, when we give it to the public sector undertaking. If we give it to private, then the benefits are not as widely accessed as they are when we give such kind of a benefit to the PSUs. Yes. Yes, obviously. Because I think someone, one of you asked, this will enable banks to increase the deposit rates for the non-resident and OCI depositors. This is despite the reduced interest rate differential between India and… Yes. Yes. In the next meeting or later, whether it strengthens the case or not, I don't know. But obviously, I mean, it's adverse. It's more adverse than it was previously, certainly. Yes. Whether it strengthens the case will depend on many other things, as already mentioned. We'll have to see whether it is actually getting generalized. It's not, as I mentioned, it's not just one. If it is a one-time increase, then you look through. But if it is getting generalized, it is getting persistent, it is getting into expectations, there is a time to act. So, for that, we have to wait and we have to watch. See, investments are healthy, if you look at data, the data for the second advanced estimates for last year and even if you look at some of the high frequency indicators in terms of capital goods imports, production, H1 numbers of fixed asset growth, H1 was very good, it was in two digits, H2 has moderated but still it's high, single digits. If you look at all these indicators, it's decent, of course there is always hope for more. Inflows also have been, FDI I think we gave you the numbers, it's continuing, , on the inflows as to how the situation looks like. We have a plan, every year we build a plan of what the requirement of currency is and that is provided to the banks as and when it is required. The ATM part I have not looked into but certainly we will, if there is a shortage we will certainly ensure that the shortage is met with. We have sufficient currency to provide and fill and refill the ATMs at the bank branches. Number I have already mentioned, we don't have a specific number but obviously it will all put together, it will be very healthy. Answer to your second question, rural demand, well yes, private consumption, well, yes, some impact will be there. On Forex Challenges & Forward Market No, we don't expect but we are always prepared. We, as mentioned we have sufficient reserves and we have the buffers and we will do whatever is required in order to ensure that we have good flows and we are able to maintain an orderly movement of the road. These are the primary areas that we will focus. Thank you sir.We will now take the remaining questions from the right side. No, we don't. There was some news that we have sold gold or something. So there is no such sale. There is only a marginal increase in our gold holdings. Uncertainty is on various accounts. It is on account of the conflict, the duration of the conflict, the time it will take for restoration of supplies. There is uncertainty about the monsoon, the El Nino. So there are various uncertainties which have implications for both inflation and for growth. So we will be watching all these uncertainties as to how they fold out and what impact they have. I think credit growth has been very robust, 16% plus is the credit growth. Banking, total put together 15% plus. So, it will be a satisfactory. Given, , the whole economic macroeconomic situation the way it is, I think it is quite satisfactory and we will continue to work on further improving it wherever we find there is scope. I don't have anything more to add. If there is any speculation, excessive speculation, speculation which leads to excessive volatility, let me put it like that, any disorderly movement that we see, it's then that we are doing and we take appropriate macro, prudential, regulatory measures and we'll be watchful, we'll be vigilant and we'll take as measures as may be necessary. My understanding is that we have sufficient fertilizer supplies for the Kharif crop and in any case, if see, if the monsoon is going to be, we do not know, if it is going to be subnormal, then that only reduces, not increases. The inflation is inching up. You have said that the depositors' interest may get compromised for a longer period. So, let's wait, let's watch, let's see how the data comes and we will take it as policy by policy. I will request my DG. He looks after the IT, cyber security. I will request him if he can throw more light on it. To the best of my knowledge, it has not yet been given. There are talks, there are discussions on Claude and others which hopefully we will get. Nevertheless, despite that we are fully prepared and we keep briefing up. I will request my DG to let of some of the measures that we are taking to be able to meet this challenge.