Why in News?
In its February 2026 monetary policy review, the Reserve Bank of India–led MPC kept the policy repo rate unchanged at 5.25%, while raising FY26 GDP growth and inflation projections, citing benign inflation and evolving macroeconomic conditions.
Description:
Key Terms:
- Repo Rate: Rate at which RBI lends short-term funds to commercial banks.
- LAF (Liquidity Adjustment Facility): Framework through which RBI manages daily liquidity via repo and reverse repo.
- CPI Inflation: Consumer Price Index–based inflation, MPC’s nominal anchor.
- Neutral Stance: Policy stance where future rate actions can be either tightening or easing based on data.
Monetary Policy Committee:
| MPC | Composition | Operational Facts |
| Nature: Statutory monetary policy body Legal Basis: RBI Act, 1934 (Amended in 2016), Section 45ZB Function: Determines the policy (repo) rate Inflation Target: 4% ± 2% (CPI) Binding Nature: MPC decisions are binding on RBI | Total Members: 6 RBI – 3: RBI Governor (Chairperson)Deputy Governor (Monetary Policy)RBI official (Central Board nominee) Government – 3: Appointed by Central GovernmentExperts in economics / banking / finance / monetary policy | Tenure: 4 years (No re-appointment) Meetings: Minimum 4 times a year Quorum: 4 members Decision Rule: Majority vote Casting Vote: RBI Governor (in case of tie) |
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