Monetary Policy Committee Under RBI Act, 1934

Economists expect the Reserve Bank of India to pause further rate cuts and maintain the current repo rate amid rising inflation concerns and tight liquidity conditions. The development brings focus on monetary policy tools and the Monetary Policy Committee framework.

Monetary Policy & Monetary Policy Committee (MPC):

Dimension	Key Details
Monetary Policy Definition	Refers to actions undertaken by a central bank to manipulate money supply and credit conditions to stimulate or restrain economic activity
Quantitative Tools	CRR, SLR, Repo Rate, Reverse Repo Rate, Bank Rate, Open Market Operations
Qualitative Tools	Moral Suasion, Direct Action, Selective Credit Control, Margin Requirements
MPC Establishment	Constituted in 2016 as a statutory body
Legal Basis	Established under Section 45ZB of the RBI Act, 1934
MPC Composition	6 members: RBI Governor, RBI Deputy Governor in charge of Monetary Policy, one RBI officer nominated by Central Board, and three members appointed by Central Government
Tenure of Appointed Members	Four years or until further orders, whichever is earlier, and not eligible for re-appointment
MPC Meetings	Mandated to meet at least four times a year
Quorum	Four members
Decision-Making	Decision taken by majority of members present and voting and is binding on RBI
Tie-Breaking Provision	RBI Governor has the casting vote
Primary Function	Determines policy interest rates to achieve the inflation target while supporting economic growth
Flexible Inflation Targeting	Provides for a target band of 4% ± 2%
Current Inflation	Reported at 2.2% near the lower bound of the target band
Recent Repo Rate Change	Reduced from 5.50% to 5.25% with cumulative cuts of 125 basis points in 2025
GDP Projections	RBI projects FY26 GDP at 7.3%; Government projects real GDP at 7.4%