Monetary Policy Committee Retains Repo Rate at 5.25%

Context:
The Monetary Policy Committee kept the Repo Rate unchanged at 5.25% and retained Neutral Stance. RBI revised FY 2026–27 Real GDP Growth to 6.6%, from 6.9%, and Consumer Price Index Inflation to 5.1%, from 4.6%, due to global uncertainties and higher energy prices.

Key Projections: FY 2026–27

Real GDP Growth:
6.6%

CPI Inflation:
5.1%

Reasons

• West Asia tensions
• Higher crude oil prices
• Supply-chain disruptions
• Monsoon uncertainty

Monetary Policy Committee

Recommendation:
Urjit Patel Committee, 2014

Legal Basis:
Reserve Bank of India Act, 1934, amended in 2016

Members:
6 members

Composition:

• RBI Governor — Chairperson
• RBI Deputy Governor in charge of Monetary Policy
• 1 RBI nominee
• 3 Central Government nominees

Voting:
Simple majority

Casting Vote:
RBI Governor

Target:
CPI Inflation 4% ± 2%

Inflation Basics

Headline Inflation:
Includes all items in CPI basket, including food, fuel and others.

Core Inflation:
CPI excluding food and fuel; reflects underlying inflation trend.

MPC Target Band:
2%–6%, with 4% as the target.

Liquidity Adjustment Facility

Liquidity Adjustment Facility:
RBI’s framework for managing short-term liquidity, meaning money available with banks, and keeping short-term interest rates stable.

Standing Deposit Facility — 5.00%

• Banks have excess funds.
• They deposit with RBI.
• Liquidity is absorbed.

Repo Rate — 5.25%

• Banks need normal short-term funds.
• RBI lends against Government Securities.
• Liquidity is injected.

Marginal Standing Facility — 5.50%

• Banks face emergency fund shortage.
• RBI provides overnight emergency funds.

Monetary Policy Stances

Neutral:
Status quo is possible.

Accommodative / Dovish:
Growth priority; rate cuts or liquidity support likely.

Hawkish:
Inflation control priority; rate hikes likely.