4% inflation goal remains ‘sacrosanct’, says RBI Governor

Reserve Bank of India Governor Sanjay Malhotra
| Photo Credit:
ANI

Reserve Bank of India Governor Sanjay Malhotra on Friday upheld the central bank’s policy stance, reiterating its commitment to the 4 percent inflation target while urging attention beyond short‑term supply disruptions. Speaking at the post‑policy press briefing, he expressed optimism about stronger capital inflows and explained the reasoning behind the PSU‑oriented ECB swap facility. Excerpts:

On capital inflows from the measures taken

We are not aiming for a specific figure, but we anticipate robust flows from the ECB as well as from the other measures announced today. Earlier steps, such as the liberalised ECB scheme we introduced and the government initiatives I referenced in my monetary policy statement—including trade agreements—also contribute. Taken together, we are confident of seeing a markedly healthier inflow this year compared with what would have occurred without these actions.

On inflation and the 4% target level

This target is sacrosanct for us; it is the goal set by the government. The target remains in force at 4 percent and that is what we strive to achieve. However, the target is meant to be met over a medium‑term horizon. It is not prudent to react to every minor—or even notable—deviation from the target, as doing so could produce disproportionate effects on growth. Consequently, our aim stays fixed at 4 percent.

We must monitor whether this supply‑side shock will persist or fade. We will stay vigilant if inflation begins to broaden, becoming embedded in expectations, and then act accordingly.

It is neither feasible nor advisable to keep inflation tightly pinned within a narrow band; that is why we maintain a 2‑6 percent range. While our focus and objective remain the 4 percent target, temporary fluctuations around that level are expected. If such fluctuations prove transient and inflation eases on its own, we refrain from deploying monetary‑policy tools that could generate adverse side‑effects.

On the updated list for upper layer NBFCs

The list is already in place and will remain effective until we issue a new one, which we will do shortly.

On differential rates of interest on deposits

Our policy on deposit rates is clear and consistent. For certain groups—such as senior citizens—and depending on the tenor, differential rates may be offered, provided they are fully transparent and displayed to all. Any differential rate beyond these parameters, if offered by another party, is unacceptable.

On swap facility for ECBs only for PSUs

Public‑sector entities constitute a special category, operating in sectors where the economy’s needs are pronounced and where the benefits flow back to the broader public through utilities and infrastructure. Extending the facility to PSUs therefore advantages a wider cross‑section of society.

If the benefit were extended to private firms instead, the dispersal of advantages would be far less extensive.

On Access to Mythos

To the best of my knowledge, access has not yet been granted. Discussions are ongoing regarding cloud‑based solutions and related initiatives, and we hope to secure participation soon. India has been named among the countries that will join this project, with selected corporates and financial institutions slated to receive access. The precise details are still pending. Once the opportunity arises, we will determine, in consultation with the government and other regulators, the most effective way to utilise it and decide on subsequent steps.

Published on June 5, 2026