Governor’s Statement, October 7, 2026
Distilled Policy Brief
- The Monetary Policy Committee (MPC) unanimously voted to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 5.50 per cent, consequently adjusting the standing deposit facility (SDF) rate to 5.25 per cent and the marginal standing facility (MSF) and Bank Rate to 5.75 per cent.
- The MPC changed its policy stance to calibrated tightening, noting that headline CPI inflation is expected to average almost 5.8 per cent in the next three quarters and core inflation is projected at 4.4 per cent for the financial year.
- India's domestic economic activity showed resilience with a real GDP growth of 7.8 per cent in Q1:2026-27, driven by private consumption and investment, despite a deficient and uneven southwest monsoon.
🎯 Prelims High-Yield Examination Points
Monetary Policy Committee (MPC) instruments (Repo, SDF, MSF, Bank Rate) and policy stances like 'calibrated tightening'.
⚖️ Mains Analytical & Syllabus Linkages
The challenge of balancing growth and inflation targeting in the face of global geopolitical shocks and domestic supply-side agricultural disruptions.
🎯 UPSC Prelims Practice Drill
With reference to the Indian monetary policy framework and the decisions of the Monetary Policy Committee (MPC), consider the following statements: 1. Under the Liquidity Adjustment Facility (LAF) corridor, the Standing Deposit Facility (SDF) rate serves as the floor, while the Marginal Standing Facility (MSF) rate serves as the ceiling. 2. The Bank Rate is operationally aligned with the Marginal Standing Facility (MSF) rate. 3. To manage supply-side inflation, monetary policy instruments are designed to primarily target and neutralize first-round price shocks rather than second-round effects. Which of the statements given above are correct?
- [A] 1 and 2 only
- [B] 2 and 3 only
- [C] 1 and 3 only
- [D] 1, 2 and 3
▶ Reveal Official Answer & Analytical Explanation
Statements 1 and 2 are correct: Under the operating framework of the RBI, the SDF rate (5.25%) acts as the floor of the LAF corridor, the MSF rate (5.75%) acts as the ceiling, and the Bank Rate is aligned with the MSF rate (both at 5.75%). Statement 3 is incorrect: Monetary policy cannot directly prevent first-round supply-side shocks (such as monsoon deficits or global oil spikes); instead, it primarily acts by curtailing second-round effects, such as generalized inflation expectations and firm-level pricing behavior.
🏛️ Historical Twin PYQ Anchor (2021)
Consider the following statements regarding the "National Clean Air Programme (NCAP)": 1. It is implemented by the Ministry of Environment, Forest and Climate Change. 2. Central Pollution Control Board acts as the sole regulatory executive body.