Economy
RBI's Monetary Policy Committee: How Rates Are Decided
Ahead of the next policy review, a quick look at the structure, mandate and tools of the Monetary Policy Committee.
1 min readPrelimsGS Paper III
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Why is this in the news?
Market attention is on the RBI's next bi-monthly monetary policy review and its assessment of inflation and growth.
The framework
- Flexible inflation targeting was given a statutory basis through amendments to the RBI Act, 1934 in 2016.
- The inflation target is 4% CPI inflation, with a tolerance band of 2% to 6%.
- The MPC has six members — three from the RBI (including the Governor) and three appointed by the Central Government.
| Tool | What it does |
|---|---|
| Repo rate | Rate at which RBI lends to banks against government securities |
| Standing Deposit Facility | Absorbs liquidity without collateral; floor of the corridor |
| Marginal Standing Facility | Emergency borrowing for banks; ceiling of the corridor |
| Cash Reserve Ratio | Share of deposits banks must keep with the RBI |
TagsRBIInflation targetingRepo rate
All current affairs for 16 September 2026