Sanjay Malhotra’s 1st year as RBI governor

The RBI under him prizes stability, yet remains open to reform. The onus is on the banking industry to prove it deserves Malhotra’s trust

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Those who have seen Reserve Bank of India (RBI) Governor Sanjay Malhotra in his earlier avatars as the chairman and managing director of REC Ltd, secretary of financial services in the Ministry of Finance, and revenue secretary, are familiar with his hands-on approach.

At group meetings, he would take copious notes. If the group met again, even months later, everyone would be on high alert, for Malhotra might well refer to a point raised in the past meeting for a clarification or even a fresh round of discussion. Bankers and heads of other regulated entities are, probably, experiencing the same now.

On December 10, Malhotra will complete his first year as RBI governor. How has it gone?

Between February and December, there has been a 125-bps rate cut - the most aggressive easing since 2019.

In private, some industry watchers say he is playing a one-day match, hitting every ball for a six. They particularly refer to two monetary policies — the ones in June and October.

In the June policy, the RBI reduced the repo rate for the third successive time, which was widely expected. But the depth of the rate cut — half a per cent — was a surprise. The regulator didn't stop there. The action-packed policy pared the cash reserve ratio — the portion of net demand and time liabilities (a loose proxy for deposits), which commercial banks keep with the RBI and on which they do not earn any interest — by 1 percentage point to 3 per cent.

Also, the stance of the policy was changed from “accommodative” to “neutral”. This was after changing the stance from “neutral” to “accommodative” in the previous policy, in April.