Three Potential Changes To Watch Out For Under New RBI Governor Sanjay Malhotra

The appointment of Sanjay Malhotra as the new governor of the Reserve Bank of India (RBI) comes at a time when the country is reeling through soaring inflation and economic slowdown. As a bureaucrat, Malhotra will be expected to bring fresh perspectives on the table with respect to India’s growth trajectory.

Nomura has pointed out at the potential outlook of economy under Sanjay Malhotra’s leadership

1. Bank credit growth

As per Nomura, Malhotra’s stint in the Department of Financial Services (DFS) can lead to cooler macroprudential measures. With familiarity to banking operations, his decisions can also propel a balanced approach to economic cycles by encouraging lending while keeping a tap on risk management. Malhotra can encourage banks to adopt advanced technology.

2. Currency Management

Under the tenure of Sanjay Malhotra, RBI is set to reduce the gap between country’s forex reserves and volatility in the currency market. Nomura also expects flexibility in exchange rate movements.

3. Market Expectations

The appointment of Sanjay Malhotra is likely to indicate an accommodative monetary policy. In the upcoming February MPC meeting, the market is expecting a terminal rate of 75 bps. Rumours about interest rate cuts above 25 bps are also brewing.