Monetary Policy Committee: members, voting, minutes and policy stance
Why in news: On 21 October 2026 the RBI released minutes of the MPC's 5-7 October meeting, which raised the repo rate to 5.50%.
The Monetary Policy Committee (MPC), set up under Section 45ZB of the Reserve Bank of India Act, 1934, is a six-member body that sets the repo rate needed to meet the inflation target. Each member votes and gives written reasons. Minutes of its 5-7 October 2026 meeting, out on 21 October, showed a unanimous hike but a split on stance.
Syllabus: GS3 · Indian Economy & Growth; Prelims · Economy & Social Development; GS2 · Statutory & Regulatory Bodies
Why this matters for UPSC
GS3 Indian economy (monetary policy) and GS2 statutory bodies: Prelims asks the MPC's members, quorum, casting vote, minutes and inflation target under the RBI Act; Mains asks whether inflation targeting and the committee's design suit supply-shock inflation.
In short
The Monetary Policy Committee is the six-member body under Section 45ZB of the RBI Act, 1934 that fixes the policy repo rate needed to meet the inflation target.
The committee's worth lies in visible, reasoned dissent; keeping external members independent and stance language precise matters more than any single rate move.
Why it matters
A family repaying a home loan linked to the repo rate feels the committee's decision in its monthly instalment, and a saver sees it in deposit rates. Because the minutes show how each member voted and why, a business planning to borrow can judge whether more increases are coming: a stance of calibrated tightening tells it cheaper credit is off the table for now. The larger issue is trust. Inflation targeting works only if people believe prices will be held near the target; when households expect high inflation, firms raise prices and workers seek higher wages, and the rise feeds itself. A committee that explains itself in public makes that belief easier to hold.
Prelims pointers
- Section 45ZA, RBI Act: the Centre, in consultation with the RBI, sets the CPI inflation target once every five years.
- Search-cum-Selection Committee (Section 45ZC): Cabinet Secretary (chair), RBI Governor or a Deputy Governor representative, Secretary of Economic Affairs and three expert nominees.
- External MPC members cannot be appointed after completing 70 years, nor if an RBI employee, a public servant, or a Member of Parliament or State Legislature.
- Section 45ZI: the Governor presides; in his absence the Deputy Governor who is a member presides over the meeting.
- Section 45ZM: the Monetary Policy Report is published once every six months.
- Failure, as notified by the Centre: average inflation above 6% or below 2% for any three consecutive quarters (Section 45ZN report follows).
- LAF corridor: SDF rate is the floor, 25 bps below repo; MSF rate the ceiling, 25 bps above; SDF replaced the fixed reverse repo as floor in April 2022.
Practise a UPSC-style question
With reference to the Monetary Policy Committee constituted under the Reserve Bank of India Act, 1934, consider the following statements:
1. The Deputy Governor of the Reserve Bank in charge of monetary policy is an ex officio member of the committee.
2. Its three members appointed by the Central Government hold office for four years and are eligible for reappointment.
3. The decision of the committee on the policy rate is binding on the Reserve Bank.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Show the answer
Answer: (c) 1 and 3 only
Answer: (c) 1 and 3 only. External members serve one four-year term with no reappointment.
Statement 1: correct. Section 45ZB(2)(b) makes the Deputy Governor in charge of monetary policy an ex officio member.
Statement 2: incorrect. Section 45ZD(1) gives the Centre's three appointees four years in office and makes them ineligible for re-appointment.
Statement 3: correct. Section 45ZB(4) says the decision of the Monetary Policy Committee is binding on the Reserve Bank.
Eliminate: statement 2 is wrong, since external members cannot be reappointed. Out: (a), (b), (d).
Trap: Half-true statement. The four-year term is right, but the added reappointment makes statement 2 false.
Remember: External MPC members: four years, one term only; MPC decisions bind the RBI.
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