RBI Monetary Policy Framework
Inflation Targeting and the MPC
The RBI operates under a flexible inflation targeting (FIT) framework, established by amending the Reserve Bank of India Act, 1934, in 2016. The target is to maintain CPI (Consumer Price Index) inflation at 4 per cent with a band of ±2 per cent (i.e., 2-6 per cent). The Monetary Policy Committee (MPC), a six-member body (3 from RBI + 3 external members appointed by the Government), is responsible for setting the policy repo rate to achieve this target. The MPC meets at least four times a year; decisions are by majority vote, with the RBI Governor having a casting vote. The MPC's decisions are binding on the RBI. The framework replaced the earlier multiple-indicator approach and gives price stability primacy as the monetary policy objective.
- Legal basis: RBI Act, 1934 (Section 45ZA-45ZL, amended 2016)
- Inflation target: 4% CPI ± 2% band (2-6% range)
- Target review: Every 5 years by Government (currently extended)
- MPC composition: 3 RBI officials (Governor + 2 Deputy Governors/other) + 3 external government-appointed members
- Meeting frequency: At least 4 times per year (typically 6 times/year, bi-monthly)
- Failure trigger: If inflation stays outside 2-6% band for 3 consecutive quarters, RBI must report to Government with reasons and corrective action
- Policy tools: Repo rate, reverse repo rate, CRR, SLR, OMOs, MSF
● Tracked since February 20, 2026 · last seen March 05, 2026 · updates as the daily brief publishes