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Monetary Policy Committee (MPC)

The Monetary Policy Committee (MPC) is a statutory body established under the Reserve Bank of India Act, 1934, following its amendment in 2016. It was created to make monetary policy decisions more transparent, accountable, and based on collective decision-making rather than the discretion of a single authority.

The MPC is responsible for determining the policy repo rate and formulating monetary policy to maintain price stability while supporting economic growth.

Composition of the MPC

The Monetary Policy Committee consists of six members:

  • Governor of the Reserve Bank of India – Chairperson (Ex-officio)
  • Deputy Governor of the RBI in charge of monetary policy
  • One officer of the RBI nominated by the Central Board
  • Three external members appointed by the Central Government, who are experts in economics, banking, finance, or related fields.

Thus, the Committee comprises three members from the RBI and three members nominated by the Government of India.

Inflation Target

Under Section 45ZA of the Reserve Bank of India Act, 1934, the Central Government, in consultation with the Reserve Bank of India, notifies the inflation target once every five years.

The Government has retained the Consumer Price Index (CPI) inflation target at 4% with a tolerance band of ±2% (2%–6%) for the five-year period from 1 April 2026 to 31 March 2031.

Decision-Making Process

  • Each member of the MPC has one vote.
  • Monetary policy decisions are taken by majority vote.
  • In the event of a tie, the RBI Governor has a casting vote.
  • The MPC is required to meet at least four times a year, though it generally meets once every two months (six meetings annually) to review domestic and global economic conditions and decide the policy repo rate.

Recent Update

At its August 2026 meeting, the MPC unanimously decided to keep the policy repo rate unchanged at 5.25%, while continuing with a neutral policy stance. The RBI reaffirmed its commitment to maintaining inflation within the prescribed target range while supporting sustainable economic growth.

FAQs on the Monetary Policy Committee (MPC)

1. What is the Monetary Policy Committee (MPC)?
The MPC is a statutory body that formulates India’s monetary policy and decides the policy repo rate.

2. When was the MPC established?
The MPC was established in 2016 through an amendment to the Reserve Bank of India Act, 1934.

3. What is the primary objective of the MPC?
Its primary objective is to maintain price stability while supporting economic growth.

4. How many members are there in the MPC?
The MPC consists of six members.

5. Who chairs the Monetary Policy Committee?
The Governor of the Reserve Bank of India serves as the Ex-officio Chairperson of the MPC.

6. How is the MPC constituted?
It comprises three members from the RBI and three external members appointed by the Central Government.

7. How often does the MPC meet?
The MPC meets at least four times a year, but it generally holds six meetings annually.

8. What is India’s current inflation target under the MPC framework?
The current inflation target is 4% with a tolerance band of ±2% (2%–6%) for the period 2026–2031.

9. How are MPC decisions taken?
Decisions are made by majority vote, and the RBI Governor has a casting vote in case of a tie.

10. What was the MPC’s latest policy decision (August 2026)?
The MPC kept the repo rate unchanged at 5.25% while maintaining a neutral policy stance.