What is the Monetary Policy Committee (MPC)?

The Monetary Policy Committee (MPC) is a six-member statutory body constituted under Section 45ZB of the amended Reserve Bank of India Act, 1934 (amended by the Finance Act, 2016). It is responsible for fixing the benchmark policy interest rate (repo rate) to contain inflation within a target band. The MPC was constituted on 29 September 2016 as part of India's shift to a flexible inflation targeting (FIT) framework.

The MPC consists of three members from the RBI -- the Governor (Chairperson), a Deputy Governor, and one RBI officer -- and three external members nominated by the Government through a search-cum-selection committee. Decisions are taken by majority vote, with the Governor having a casting vote in case of a tie. The MPC is mandated to meet at least four times a year (currently meets six times in a bimonthly cycle).

The inflation target is set at 4% CPI inflation with a tolerance band of +/- 2% (i.e., 2% to 6%). If inflation remains outside the 2-6% band for three consecutive quarters, the RBI must submit a report to the Government explaining reasons and remedial actions. The FIT framework was initially set for five years (2016-2021) and has been extended for another five years (2021-2026).

Key Features

# Feature Details
1 Constituted under Section 45ZB, RBI Act 1934 (amended 2016)
2 Composition 6 members: 3 RBI (Governor as Chair) + 3 external (govt-nominated)
3 Decision Making Majority vote; Governor has casting vote
4 Inflation Target 4% CPI (+/- 2% tolerance band = 2% to 6%)
5 Key Tool Repo rate (benchmark policy rate)
6 Meeting Frequency Minimum 4 times/year; currently bimonthly (6 times)
7 External Member Tenure 4 years; not eligible for reappointment
8 Failure Clause If inflation outside 2-6% for 3 consecutive quarters, RBI must explain to govt

Current Status / Latest Data

  • Current Repo Rate: 5.25% (as of February 2026 MPC meeting, held 4-6 February 2026 -- 59th MPC meeting).
  • Recent Rate Cuts (2025-26):
    • April 2025: Cut by 25 bps to 6.00%
    • June 2025: Cut by 50 bps to 5.50%
    • December 2025: Cut by 25 bps to 5.25%
    • February 2026: Held unchanged at 5.25%
  • Policy Stance: Neutral (signalling data-dependent future decisions).
  • Current RBI Governor/MPC Chair: Sanjay Malhotra (took charge December 2024).
  • GDP Growth Projection (FY2025-26): RBI projects 6.5%.
  • CPI Inflation Projection: Within the 4% +/- 2% target band for FY2025-26.
  • Cumulative easing in FY2025-26: 100 basis points (from 6.50% to 5.25%).

UPSC Exam Corner

Prelims: Key Facts

  • MPC has 6 members: 3 from RBI + 3 external (government-nominated)
  • Constituted under Section 45ZB of RBI Act, 1934
  • Inflation target: 4% CPI with +/- 2% tolerance band
  • Decisions by majority vote; Governor has casting vote
  • External members serve 4-year terms; not eligible for reappointment
  • Current repo rate: 5.25% (February 2026)

Mains: Probable Themes

  1. Evaluate the effectiveness of the Monetary Policy Committee in managing inflation while supporting economic growth
  2. Discuss the challenges of flexible inflation targeting in a supply-shock-prone economy like India
  3. Should the MPC's mandate be expanded beyond inflation targeting to include employment and growth objectives?
  4. Analyse the independence of the MPC -- does the government's role in nominating external members compromise monetary policy autonomy?

Sources: PIB - RBI Monetary Policy February 2026, PIB - April 2025 Policy, DD News - RBI GDP Forecast