PwC Partner and Economic Advisory Services leader Ranen Banerjee has made a strong case for the Reserve Bank of India to maintain status quo on interest rates, arguing that any cut at this time would amount to 'wasting a bullet' in an environment characterized by robust growth and benign inflation.

RBI Unlikely to Cut Rates in February MPC Meeting

The Reserve Bank is unlikely to reduce the key policy rate in the next Monetary Policy Committee meeting scheduled for February 4-6, 2026, according to Banerjee. This will be the last MPC meeting of the current fiscal year, headed by Reserve Bank Governor Sanjay Malhotra.

Banerjee told PTI that if growth numbers continue to hold up and base year revision provides better estimates as expected, there would be no justification for a rate cut. The economist emphasized that the current economic conditions do not warrant monetary easing.

Private Capex Not Interest Rate Sensitive

Addressing concerns about private capital expenditure, Banerjee clarified that private capex is not interest rate sensitive and will pick up only when capacity utilization approaches 85%. He explained that current capacity utilization remains in the 70-75% range, which does not create immediate urgency for additional private sector capacity expansion.

"I do not think that private capex is held up because of the interest rate. It is because there is uncertainty of demand or the confidence in demand or sustainability of demand is not there," Banerjee stated.

Recent RBI Rate Cut History

The MPC's recent monetary policy actions show a pattern of accommodation. Last month, the six-member committee voted unanimously to lower the repurchase rate by 25 basis points to 5.25% while retaining a neutral stance. This marked the fourth rate cut since February 2025, following a pause in August and October meetings.

Inflation Targeting Framework

The central bank operates under a government mandate to ensure consumer price index-based retail inflation remains at 4% with a margin of 2% on either side. With inflation currently contained within this target range and growth remaining robust, Banerjee argues that monetary policy tools should be preserved for when they are genuinely needed.

"Firing a bullet when it is not needed as we are having good growth and contained inflation. So, there is no need for a rate action at this point of time," he concluded, advocating for the MPC to continue its pause rather than pursue further rate cuts.

Reserve Bank of India Governor Sanjay Malhotra has emphasized the critical need for collaboration among financial institutions to address the escalating threat of digital fraud. Speaking on Friday, Malhotra called upon banks, non-bank financiers, and other RBI-regulated entities to work together in protecting customers and maintaining trust in the financial system.

Significant Decline in Digital Payment Frauds

The RBI's annual report reveals a substantial improvement in digital payment fraud statistics. The data shows a marked decrease in both the value and volume of fraudulent transactions across the banking sector.

AI-Powered Fraud Detection Systems

The central bank has deployed advanced technological solutions to combat digital fraud. MuleHunter.ai, an artificial intelligence-enabled system developed by the Reserve Bank Innovation Hub, has demonstrated remarkable effectiveness in identifying suspicious accounts.

Key achievements of the fraud detection system include:

• Detection of approximately 20,000 mule accounts monthly
• Strong success rate in identifying fraudulent activities
• Early identification of accounts showing suspicious transaction patterns

Mule accounts, which act as conduits for funds not belonging to the account holder, typically remain dormant before suddenly displaying spikes in low-value, high-volume transactions. The regulator has implemented specific measures to help banks identify such accounts proactively.

Enhanced Supervisory Approach

Malhotra outlined the RBI's evolving supervisory strategy, emphasizing a shift toward more technology-driven oversight. The central bank intends to make supervision increasingly off-site rather than on-site, with near real-time monitoring replacing periodic assessments.

"Increasingly, this will also mean using SupTech (supervisory technology) and AI-enabled tools more deeply, while retaining judgment and accountability, firmly with supervisors," Malhotra stated. He added that similar technological tools could support the RBI's department of regulation in evidence-based rule-making.

Enforcement Actions and Regulatory Approach

The RBI's enforcement strategy reflects a balanced approach to regulatory compliance. In 2025, the central bank imposed smaller penalties on banks, with the median fine on lenders reaching almost half the level of the previous two years.

Malhotra clarified that the regulator's approach is generally not punitive, with the intent being to course-correct by signaling concerns to involved entities and making others aware of acceptable conduct standards and regulatory expectations. The enforcement actions in 2025 included fines on public sector, private sector, and foreign banks, as well as small finance and payments banks.

Focus on Customer Protection

The governor emphasized that protecting customers' interests must become the cornerstone of a sustainable and resilient financial system. While acknowledging that digital channels have improved financial inclusion and convenience, Malhotra cautioned about potential risks in the absence of adequate safeguards.

"Our aim should be to ensure that digitalization and innovations are aligned with fair outcomes for consumers," he said, noting that protecting customers from rising digital frauds has engaged national attention. He warned that inadequate guardrails could enable opaque pricing, weak disclosures, and inappropriate recovery practices in digital financial services.