RBI governor urges banks, corporates to kickstart a new investment cycle

Reserve Bank of India (RBI) governor Sanjay Malhotra, on Monday, urged banks and corporates to seize a balance sheet, a stabilised macroeconomic environment, and robust domestic demand. He said, “At a time when banks and corporates have the strongest balance sheets in decades, they must come together and drive the animal spirits to spark a new investment cycle,” Speaking at the FIBAC annual conference organised by Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA) Malhotra also highlighted that the impact of recent US-India tariff measures is expected to be limited, with nearly 45 % of trade already outside the tariff regime. While sectors such as textiles, auto components and MSMEs could face some pressure if tariffs persist, the Reserve Bank has assured that adequate policy support, including liquidity measures, will be extended wherever needed.

Malhotra said despite global challenges ranging from supply chain disruptions to inflationary shocks and geopolitical tensions India economy has been resilient. He said, “India is one of the fastest-growing major economies, clocking 8% growth per annum in the last four years We are also one of the fastest major economies in the world projected to be the third largest economy in the coming years.”

He also talked about the easing of inflation. In July, headline inflation dropped to 1.6% the lowest in eight years, a milestone with powerful implications. “Headline inflation fell to 1.6% in July this is the lowest level in eight years,” Malhotra said, adding that it not just a data point, but a beacon of stability that restores consumer confidence and empowers households and businesses alike.

For households, this comes as a much-needed relief from rising living costs. For businesses and investors, it signals a period of price stability and stronger purchasing power conditions that support consumption and long-term demand. This improvement in inflation is further strengthened by the remarkable build-up of foreign exchange reserves, which now stand at $695 billion—enough to cover nearly eleven months of imports. Such buffers make India far more resilient to external risks like global currency fluctuations, oil price spikes, or sudden capital outflows factors that have destabilised many emerging markets in the past, he added.

Malhotra also emphasised that financial stability and price stability should not be viewed as constraints to growth. “Financial stability and price stability are not in opposition to growth they are essential to making growth durable and sustainable,” he said, underscoring the RBI’s continued focus on steering India’s economy through global uncertainties while keeping long-term fundamentals intact.

Looking ahead, he underscored two critical areas that will shape India’s financial future. The first is deepening financial inclusion. While the country has succeeded in reaching nearly every village with basic banking access, the next step is to ensure greater quality of service and meaningful usage, he said. The second is technology. With artificial intelligence and machine learning poised to transform banking, he said, India’s financial system must be ready to adopt and integrate these tools to drive efficiency, improve risk management, and expand credit access.

Lastly, on the issue of rupee internationalisation, it was underlined that the RBI has already facilitated trade settlements in local currencies with countries such as Mauritius, Indonesia, and the UAE. These arrangements, while still at a nascent stage, are helping reduce exchange rate risks and transaction costs for Indian businesses. Malhotra however, emphasised that this is a gradual, long-term process that will evolve over years and decades before trade in local currencies becomes more widespread.