RBI Chief Flags Tariff Risks, Cites $695 Billion FX Buffer

Reserve Bank of India Governor Sanjay Malhotra said the central bank stands ready to deploy additional policy tools if the 50% U.S. tariffs that take effect on Wednesday curb domestic economic growth. Speaking at the FIBAC 2025 banking conference in Mumbai on 25 August, Malhotra stressed that price and financial stability remain compatible with the RBI’s growth objective. Malhotra pointed to foreign-exchange reserves of USD 695 billion—enough to cover roughly 11 months of merchandise imports—as evidence of a strengthened external sector and a buffer against global shocks. The current-account deficit has stayed moderate, while headline inflation has fallen below the RBI’s 4% target for the first time in eight years, giving policymakers room to support activity. The governor noted that the central bank has already lowered the repo rate by 100 basis points this year and will continue to supply ample liquidity to the banking system. Officials are also monitoring food and energy prices, global supply-chain disruptions and geopolitical tensions, and are exploring greater use of local currencies in trade to mitigate external risks.