Top Bankers will be meeting the Reserve Bank of India (RBI) brass, including new Governor Sanjay Malhotra, on January 15, in the run up to the current financial year’s last monetary policy committee (MPC) meeting and slowing economic growth.

The meeting also assumes significance as it will be held in the backdrop of moderation in credit growth, inflation staying above MPC’s 4 per cent target, tightness in liquidity in the banking system, and a depreciating currency.

The Bankers’ meeting with RBI top management is expected to be attended by public sector bank chiefs, including SBI Chairman, and select large private sector bank chiefs. 

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The MPC will be meeting from February 5 to 7. This will be Malhotra’s first meeting as Chairman of MPC. He took over as RBI Governor on December 11, 2024.

With real GDP growth moderating to a seven-quarter low of 5.4 per cent in Q2 (July-September) of FY25 as against 8.1 per cent in the year ago quarter and 6.7 per cent in Q1 (April-June) of FY25, there is a growing demand, including from the Government, for a repo rate cut.

The Department of Economic Affairs, in its latest monthly economic review, observed that that the possibility of structural factors contributing to the slowdown in H1 cannot be ruled out.

“The combination of monetary policy stance and macroprudential measures (on November 16, 2023, RBI increased the risk weights on unsecured consumer credit exposures of banks and NBFCs (including credit card receivables) as well as bank lending to NBFCs, other than housing finance companies) by the central bank may have contributed to the demand slowdown,” per the review.

Credit growth of all scheduled banks has slowed to 11.06 per cent as on December 27, 2024, against 19.61 per cent as on December 29, 2023, per RBI data.

The review cited as good news that the central bank lowered the cash reserve ratio from 4.5 per cent to 4 per cent in its policy meeting in December 2024. THis should help boost credit growth, which has slowed a little too much and quickly in FY25.

The MPC has maintained a status quo on the repo rate, which was last revised from 6.25 per cent to 6.50 per cent on February 8, 2023, in the wake of retail inflation staying above its 4 per cent target.

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In his foreword to the latest Financial Stability Report, Malhotra observed that stress test results reveal that capital levels of the banking system as well as of the non-banking financial companies (NBFCs) sector will remain well above the regulatory minimum even under adverse stress scenarios.

The Governor emphasised that notwithstanding the uncertainties shrouding the global macrofinancial ethos as it unfolds, prospects for the Indian economy are expected to improve after the slowdown in the pace of economic activity in the first half of 2024-25.

Consumer and business confidence for the year ahead remain high and the investment scenario is brighter as corporations step into 2025 with robust balance sheets and high profitability, he added.