RBI's MPC meet begins today: Repo rate, stance, inflation outlook, and more

Business Standard

2 days ago

The Reserve Bank of India's rate-setting body, the Monetary Policy Committee (MPC), is scheduled to begin its bi-monthly meeting today. After keeping the repo rate unchanged for 11 consecutive meetings, the committee slashed the rate in the last three meetings, bringing it down from 6.5 per cent in February to 5.5 per cent in June. After June's action-packed policy meeting, economists eagerly await the review for the upcoming meeting, which will be announced on August 6.
What is the Monetary Policy Committee?
The MPC is a rate-determining body formally established by the RBI in 2016 under the RBI Act, 1934. It was created to ensure greater transparency and collective decision-making in India's monetary policy. The first MPC meeting was held in October 2016.
What is the RBI MPC's role?
The committee's main objective is to maintain annual inflation at 4 per cent ± 2 per cent, while supporting economic growth.
It is tasked with deciding the repo rate, which is the rate at which the RBI lends to commercial banks. Adjustments to the repo rate help the central bank control inflation and stimulate or restrain growth, depending on prevailing economic conditions.
Who are the members of MPC?
The committee consists of six members. While three members of the committee are RBI officials, the remaining three are appointed by the Government of India.
Sanjay Malhotra, governor of RBI, will serve as the ex officio chairperson of the committee.
Other RBI members on the committee:
Poonam Gupta, deputy governor in charge of monetary policy
Rajiv Ranjan, executive director in charge of monetary policy
Government-appointed external members:
Saugata Bhattacharya, economist
Ram Singh, director, Delhi School of Economics
Nagesh Kumar, director & CEO, Institute for Studies in Industrial Development (ISID)
How does the MPC function?
All the decisions in the policy meeting are taken by majority, with each member having one vote. The governor calls for a vote in case of a tie. The policy meeting is held bi-monthly, six times a year.
Members observe a 'silent period' of seven days before and after the meeting to ensure confidentiality.
June 2025 RBI MPC highlights
In the last MPC meeting held between June 4–6, the RBI monetary policy committee announced the following:
Repo rate: The repo rate was slashed by 50 basis points (bps) to 5.5 per cent, marking the third straight cut in 2025.
CRR: The MPC reduced the cash reserve ratio (CRR) by 100 bps to 3 per cent, potentially releasing ₹2.5 trillion into the banking system. CRR is the portion of cash that commercial banks need to keep with the central bank.
Stance: The committee also shifted its stance from 'accommodative' to 'neutral', signalling a more balanced approach going forward. The rate cut was backed by five out of six members, including Governor Malhotra.
Inflation: In June, the MPC revised its FY26 CPI inflation forecast down to 3.7 per cent (from 4 per cent), citing benign food prices and a favourable monsoon.
Economic growth: The FY26 GDP growth estimate was retained at 6.5 per cent.
The trend so far
Since February 2025, the MPC has cumulatively reduced the repo rate by 100 basis points:
February: 25 bps cut
April: 25 bps cut
June: 50 bps cut
Despite monetary easing, credit growth remains sluggish, pointing to demand-side challenges in the broader economy.
What to expect in August MPC meet?
As earlier reported by Business Standard, economists are split on the August policy direction. While some experts are expecting another 25 bps cut, others believe that the committee will further lower the inflation estimate.
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