Minutes of the Monetary Policy Committee Meeting, August 3 to 5, 2026
The Monetary Policy Committee (MPC) held its 62nd meeting from August 3 to 5, 2026, and voted unanimously to keep the policy repo rate unchanged at 5.25%, with the standing deposit facility (SDF) rate at 5.00% and the marginal standing facility (MSF) rate/Bank Rate at 5.50%.
The MPC retained its "neutral" monetary policy stance.
Real GDP growth for 2026-27 was projected at 6.7%, with CPI inflation projected at 5.0% for the year, expected to peak at 5.9% in Q3:2026-27.
The minutes, published under a statutory 14-day disclosure requirement, recorded individual member statements citing global uncertainty (West Asia conflict, volatile oil prices, tariff actions) and a deficient/uneven monsoon as key risks to the outlook.
Monetary Policy Committee — Constitution under Section 45ZB, RBI Act 1934
The MPC is a six-member statutory body created by the Finance Act 2016 amendment to the RBI Act, 1934, responsible for fixing the policy repo rate to achieve the inflation target. It replaced the earlier system where the RBI Governor alone decided the policy rate.
Key Details
- Composition under Section 45ZB(2): the RBI Governor (Chairperson, ex officio), the Deputy Governor in charge of monetary policy (ex officio), one RBI officer nominated by the Central Board (ex officio), and three persons appointed by the Central Government (external members).
- Quorum for an MPC meeting is four members; each member has one vote, and the Governor holds a casting vote in case of a tie.
- The MPC is statutorily required to meet at least four times a year; it meets more frequently in practice (six bimonthly cycles).
- August 2026 meeting: chaired by Governor Sanjay Malhotra, with Deputy Governor Poonam Gupta, RBI-nominated Executive Director Indranil Bhattacharyya, and three external members (Nagesh Kumar, Saugata Bhattacharya, Ram Singh).
The August 2026 minutes are a textbook illustration of Section 45ZB in operation — three ex-officio RBI members and three government-appointed external members voting together, with the Governor's institutional role (chair plus tie-breaking vote) unchanged even though this vote was unanimous.
Section 45ZL — Statutory Disclosure of MPC Minutes
Section 45ZL of the RBI Act, 1934 mandates that the RBI publish the minutes of every MPC meeting on the 14th day after the meeting concludes. This transparency provision distinguishes India's inflation-targeting framework from the earlier opaque, Governor-driven rate-setting process.
Key Details
- Minutes must include: the resolution adopted, each member's vote (ascribed by name), and each member's individual statement under Section 45ZI(11).
- The 62nd MPC meeting (August 3-5, 2026) minutes were published on August 19, 2026 — the 14th day, matching the statutory deadline.
- This individualized, published voting record (unlike, say, opaque central bank committees elsewhere) allows accountability tracking of each member's stance over time.
The article itself is the Section 45ZL disclosure — the RBI's minutes, complete with a unanimous 6-0 vote table and six separately signed statements, is the concrete output of this legal requirement.
Flexible Inflation Targeting (FIT) Framework
India adopted flexible inflation targeting via the 2016 amendment (Section 45ZA) to the RBI Act, 1934, replacing the earlier multiple-indicator approach to monetary policy. The Central Government, in consultation with the RBI, fixes a numerical inflation target once every five years.
Key Details
- Target: CPI inflation of 4%, with a tolerance band of +/-2% (i.e., 2%-6%).
- The RBI is deemed to have "failed" the target if CPI inflation stays above 6% or below 2% for three consecutive quarters, triggering a mandatory report to the government explaining reasons and corrective measures.
- The target was last renewed for the 2026-2031 period.
- In the August 2026 minutes, headline CPI at 4.4% (June 2026) is within the tolerance band despite crossing the 4% mid-point, which is why the MPC judged no rate action was required.
The MPC's rationale for holding rates rests entirely on FIT mechanics — inflation is projected to peak at 5.9% in Q3 (still under the 6% breach threshold) with core inflation "benign," which under the framework does not yet require a monetary response to a supply-side shock.
LAF Corridor — Repo, SDF, and MSF Rates
The Liquidity Adjustment Facility (LAF) is RBI's operational framework for short-term liquidity management, using a "corridor" of rates with the policy repo rate at the centre.
Key Details
- Repo rate: rate at which RBI lends to banks against government securities (the anchor policy rate) — held at 5.25%.
- Standing Deposit Facility (SDF) rate: floor of the corridor, at which RBI absorbs surplus liquidity without collateral (introduced April 2022, replacing the fixed reverse repo rate) — held at 5.00% (repo minus 25 bps).
- Marginal Standing Facility (MSF) rate: ceiling of the corridor, an emergency overnight borrowing window for banks, aligned with the Bank Rate — held at 5.50% (repo plus 25 bps).
- The corridor is maintained symmetrically at +/-25 bps around the repo rate.
All three corridor rates moved together (or, in this case, stayed unchanged together) because SDF and MSF are formulaically pegged to the repo rate — a standard UPSC distinction point (repo vs. reverse repo/SDF vs. MSF).
FCNR(B) Swap Facility — RBI-Government Package for Forex Inflows
A joint RBI-Ministry of Finance package announced June 5, 2026 offered incentives to attract foreign currency deposits and capital, aimed at supporting the rupee amid global volatility.
Key Details
- FCNR(B) = Foreign Currency Non-Resident (Bank) deposit account, allowing NRIs to hold term deposits in India in foreign currency.
- As of July 31, 2026, $36.725 billion had been mobilised under the swap facility.
- The package supplemented inflows via the Fully Accessible Route (FAR) for Foreign Portfolio Investment in government bonds.
MPC member Ram Singh's statement credited this facility with stabilising the rupee and limiting imported inflation — linking a balance-of-payments management tool directly to the inflation outlook the MPC uses to justify its rate decision.
- Policy repo rate: 5.25% (unchanged); SDF: 5.00%; MSF/Bank Rate: 5.50%
- MPC vote: 6-0 unanimous to hold rate and retain neutral stance
- Real GDP growth (2026-27) projected: 6.7% (Q1: 7.0%, Q2: 6.4%, Q3: 6.5%, Q4: 6.8%)
- CPI inflation (2026-27) projected: 5.0% (Q2: 4.7%, Q3: 5.9%, Q4: 5.5%); core inflation projected at 4.3%
- CPI inflation, June 2026: 4.4% (after 16 consecutive months below the 4% target)
- FCNR(B) swap facility mobilisation (as of July 31, 2026): $36.725 billion
- Next MPC meeting: October 5-7, 2026
- Minutes published 14 days after the meeting, per Section 45ZL: August 19, 2026