RBI's Neutral Shift: A New Era in Monetary Policy

RBI Governor Sanjay Malhotra advocates a switch to a neutral monetary policy stance, enabling the central bank to adapt its policy rates flexibly. This change coincides with a recent 50 basis points reduction in the benchmark rate, aiming to provide stability during uncertain economic times.

The Reserve Bank of India's Governor Sanjay Malhotra emphasizes the benefits of shifting to a neutral monetary policy stance. This strategic shift will empower the central bank to adapt its policy rates through cuts, pauses, or hikes as economic conditions demand, according to the minutes released on Friday.

On June 6, the Monetary Policy Committee, led by Malhotra, decided to cut the benchmark short-term lending rate by 50 basis points. This marks a cumulative reduction of 100 basis points recently, alongside adjusting the policy stance from accommodative to neutral.

Malhotra assured that these measures are designed to offer a degree of certainty amid economic uncertainties, thereby bolstering growth. Of the six-member panel, five supported a 50 basis points reduction, while an external member, Saugata Bhattacharya, proposed a 25 basis points cut.

(With inputs from agencies.)