Reserve Bank of India Governor Sanjay Malhotra on Monday signalled that the central bank may step in with policy support if the United States’ 50% tariff on Indian goods, set to take effect Wednesday, begins to dent domestic growth.
“If it so happens, we will not be found wanting in our job,” Malhotra said at the Ficci-IBA annual banking conclave, stressing that the RBI had already ensured ample liquidity in the banking system and stood ready to do more, particularly for sectors most exposed to the tariff shock.
The U.S. tariff escalation, described as a penalty for India’s continued imports of Russian crude, comes on top of existing WTO-compatible duties. Sectors including gems and jewellery, textiles, apparel, MSMEs, and shrimp exports are expected to bear the brunt of the new levies.
While downplaying the broader economic fallout, Malhotra acknowledged the risks. “We are at a critical juncture,” he said. “Navigating choppy global conditions, heightened trade uncertainty, and persistent geopolitical tensions requires us to push the frontiers of growth.”
The RBI, which lowered India’s FY26 GDP forecast to 6.5% after the first U.S. tariff announcement in April, has already cut the policy repo rate by 100 basis points since February. The current rate remains unchanged at 5.5% following the August policy review.
Malhotra maintained that the central bank had not lost sight of growth while anchoring inflation. He cited past interventions, including rate cuts during COVID and periods of benign inflation, as evidence of the RBI’s commitment to balance price stability and economic expansion.
On the regulatory front, Malhotra announced that draft guidelines on credit risk and expected credit loss would be released soon. The RBI also plans to implement Basel-III norms covering market, credit, and operational risks by April 2027.
As India eyes its place as the world’s third-largest economy, Malhotra urged banks and large corporates to “drive the animal spirits” and spark a fresh investment cycle, especially at a time when balance sheets are strong and liquidity buffers remain robust.
He pointed to India’s financial sector as a pillar of resilience, noting that banks, NBFCs, and other RBI-regulated entities provide 73% of the credit to the real economy—banks alone account for 53%. “Banks are well capitalised, with sufficient liquidity buffers, robust asset quality and reasonable profitability,” he said.
Malhotra also acknowledged board-level governance concerns flagged by banks, promising reforms to free boards from routine matters and allow more focus on strategic decisions. The RBI, he said, is working to streamline credit delivery, reduce the cost of intermediation, and improve the ease of doing business.