RBI chief asks banks to cut costs, boost efficiency after rate easing

Reserve Bank of India Governor Sanjay Malhotra has urged the heads of public and select private banks to reduce intermediation costs and improve operational efficiency, saying the benefits of recent monetary easing should be passed on.

At a meeting with Managing Directors and Chief Executives, Malhotra highlighted that the 125-basis point reduction in the policy rate since February, alongside greater use of technology, should result in lower costs and higher efficiency, supporting sustainable growth and broader financial inclusion, according to an RBI statement issued on Wednesday.

The discussions were part of the central bank’s continuing engagement with senior leadership of regulated entities, following similar meetings in January.

Malhotra noted that the banking sector’s performance had strengthened through 2025, but cautioned against complacency, stressing the need for vigilance in changing conditions. He also pressed banks to reduce customer grievances and reinforce internal systems, warning of rising threats from digital fraud and calling for stronger intelligence-based safeguards.

The governor appreciated work done on re-KYC and unclaimed deposits, and encouraged proactive outreach and continued awareness efforts. He reiterated the RBI’s consultative stance, pointing to ongoing simplification and consolidation of regulations.

Bank executives shared their views on policy, supervisory and operational issues during the interaction, the statement added.

The meeting followed last week’s decision by the Monetary Policy Committee to cut the repo rate by 25 basis points to 5.25 per cent, the lowest in three years. RBI data showed banks’ weighted average term deposit rates fell by 102 basis points between February and September, while rates on fresh rupee loans declined by 73 basis points.

In its December review, the central bank also proposed a two-month campaign from 1 January 2026 to clear complaints pending with the RBI Ombudsman for more than a month.

With IANS inputs