RBI ready to take steps to cushion tariff impact: Governer

Mumbai: RBI governor Sanjay Malhotra said the central bank is prepared to cushion the economy from the fallout of the US move to impose a 50% tariff on Indian exports, while also underlining efforts to push trade in local currencies as part of the internationalisation of the rupee.

"RBI has always been very proactive in whatever needs to be done for the betterment, advancement, and growth of our country," Malhotra said. The governor was responding to a question from industry persons at the FIBAC 2025 event orgainsed by FICCI in Mumbai on Monday.


Referring to the US tariff, he added: "Post the tariff announcement in April, we had projected downwards our GDP growth by 20 basis points. There has been an additional 25% tariff making it 50%. It is set to kick in, in another couple of days. We are hopeful trade negotiations will play out and also expect that the impact will be minimal."

The governor acknowledged that while 45% of exports are outside the tariff regime, some sectors - including gems and jewellery, textiles, shrimps and MSMEs - could be hit. "The government on its part is looking at reforms. It is also looking at free trade agreements, some of which have already been in the works for some time. And on our part, the RBI has been on an easing cycle. We reduced the repo rate by about 100 basis points. We have provided ample liquidity to the banking sector and whatever else is required to support the growth of the economy."

On the longer-term push to internationalise the rupee, Malhotra said: "This is an important area on which RBI has been working for a long time. It's important for countries to develop trade in local currencies. And so the RBI has also been moving in this direction. Today, we have agreements with four countries: Maldives, Mauritius, Indonesia and UAE, and trade is starting. It has certainly helped industry and the economy as a whole because it cushions us from the volatility of foreign exchange price movements."

He added that the shift would be gradual: "Let me mention that this is a slow process. It will evolve, it will take years, or decades for trade to happen in local currencies."

Malhotra said India's macroeconomic fundamentals remain resilient, giving businesses confidence to expand. "Inflation is moderating, growth has been steady, the external sector is stable, and the financial system is sound. These provide us a strong platform from which industry can plan its next phase of expansion," he said, pointing out that domestic demand continues to be robust while buffers have been built to absorb global shocks.

Allow lenders to finance M&As: SBI chief Setty

Meanwhile, in a panel discussion during the event, SBI chairman CS Setty said that banks have been requesting the regulator and making a formal request for enabling lenders to finance M&A, to let them "at least start with some listed companies," which is currently not permitted under regulations.

In his speech, Setty said that of late, corporate funding has shown some shift to capital markets and private credit for their capital requirements, and banks have to therefore look for ways to fund the next wave of capex.

He added that startups and MSME lending provide fresh opportunities. "Enablers like formalisation and digital trails have made lending safer and scalable for the MSME segment," said Setty.


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