India’s banking sector stands ready to meet the evolving investment demands of the economy, backed by strengthened financial health, ample liquidity, and solid capital reserves, Reserve Bank of India (RBI) Governor Sanjay Malhotra said during an address at the US-India Economic Forum on Sunday. He emphasised that a stable financial system, combined with resilient macroeconomic fundamentals, positions India as an attractive destination for global investors.
‘The banking sector, which continues to meet the large funding requirements of the economy, has demonstrated resilience with a healthy balance sheet,’ Malhotra said. ‘The soundness of scheduled commercial banks (SCBs) has been bolstered by strong profitability, lower non-performing assets, and adequate capital and liquidity buffers. The health of non-banking financial companies (NBFCs) is also robust.’
He noted that although bank credit growth has moderated in recent months, it remains in double digits—approximately 12 per cent—compared to an average of about 10.5 per cent over the past decade.
Malhotra said that with a benign inflation outlook and moderate growth, monetary policy has turned accommodative. The policy rate has been reduced by a cumulative 50 basis points since February 2025 to support economic activity.
On external factors, he addressed concerns about the impact of recent US tariff policies, asserting that strong domestic demand and relatively lower dependence on exports provide a buffer for the Indian economy against global uncertainties.
Regarding the external sector, Malhotra said the current account deficit remains manageable, with the rupee moving in an orderly manner despite recent global volatility. “India’s current account deficit (1.3 per cent of GDP during April-December 2024) remains within manageable limits, supported by robust services exports and private remittances,” he said. He added that the rupee has performed better than many of its peers, underpinned by strong macroeconomic fundamentals, adequate foreign exchange reserves, and a deep foreign exchange market.
Foreign investors have continued to show confidence in India, with gross foreign direct investment (FDI) inflows rising to $75.1 billion during April-February 2024-25 from $65.2 billion in the same period the previous year. Malhotra noted that while net FDI moderated due to higher repatriations and outward investments, this reflected the maturity of the Indian market, where investors can enter and exit smoothly.
On economic growth, Malhotra projected India’s GDP to grow by 6.5 per cent in the current financial year. Although lower than in recent years, this rate remains among the highest globally and broadly in line with past trends. He highlighted that over the past four financial years (2021-22 to 2024-25), India recorded an average annual growth rate of 8.2 per cent, up from 6.6 per cent during the preceding decade.
The RBI Governor also lauded the government’s fiscal management efforts, noting that targeted government spending has improved the quality of expenditure. “The share of the central government’s capital expenditure as a percentage of GDP has surged from 1.7 per cent in 2019-20 to 3.1 per cent in 2024-25,” he said.
Malhotra credited successive governments for maintaining a steady focus on economic reforms, irrespective of political affiliation. “Economic liberalisation focusing on market-oriented policies has been a consistent theme across successive governments,” he said.
Concluding his remarks, Malhotra said that at a time when many advanced economies face economic challenges, India continues to offer strong growth prospects and macroeconomic stability, making it a natural choice for investors seeking long-term opportunities.
