New Delhi: Reserve Bank Governor Sanjay Malhotra on Thursday reiterated that maintaining financial stability across the system remains the RBI’s highest priority. He said the central bank continues to simplify regulations wherever possible while retaining the safeguards necessary to protect the financial ecosystem.
Speaking at the VKRV Rao Memorial Lecture at the Delhi School of Economics, Malhotra noted that the RBI remains alert to evolving risks and changing economic conditions. He emphasised that while short-term growth can be boosted at the expense of financial stability, the long-term consequences of instability far outweigh such temporary gains.
According to him, financial stability forms the foundation of the RBI’s work, alongside prudential requirements such as liquidity and capital norms that ensure the overall safety of financial operations. These measures, he said, serve broader stakeholder interests even when they do not directly affect stability.
Malhotra also highlighted the importance of conduct-related regulations, including consumer protection and cooperation in law enforcement matters such as money laundering, which continue to be an area of focus for the central bank.
Addressing the recent depreciation of the rupee, the Governor attributed the trend to increased demand for the US dollar. He stressed that exchange-rate movements reflect market forces, adding, “We do not target any level. If dollar demand rises, the rupee weakens; if demand for the rupee increases, the currency appreciates.”
Despite the currency movement, Malhotra underlined that India’s foreign exchange reserves remain robust and provide strong protection for the external sector, leaving no cause for concern.
Responding to a question, he said the current pressure on the rupee is predominantly trade-driven and linked to US tariff developments. He expressed optimism that a favourable trade agreement with the United States would ease the pressure on the current account and support the rupee. “We are confident there will be a good trade deal with the US going forward,” he said.
On Thursday, the rupee closed 23 paise lower at 88.71 against the US dollar.
Commenting on the performance of domestic lenders, Malhotra said the Indian banking sector’s outlook is positive. “The way Indian banks are performing, very soon a few of them will be among the top 100 global lenders,” he said.
