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.
