RBI MONETARY POLICY
- In February 2026, The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25% in its latest monetary policy announcement.
- The decision was taken by the Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra.
- The RBI decided not to change the rate because inflation is currently under control at around 2.1%. The central bank wants to support economic growth while also keeping prices stable.
WHAT IS REPO RATE?
- Repo rate is the interest rate at which the Reserve Bank of India lends short-term money to commercial banks.
- Simple Meaning
- When banks need money for a short time, they borrow from RBI by giving government securities as security.
- The interest charged on this borrowing is called the repo rate.
WHY IS IT IMPORTANT?
Repo rate helps RBI to:
- Control inflation
- Manage money supply
- Control credit flow
- Support economic growth
Any change in repo rate directly affects:
- Loan interest rates
- EMI amounts
- Business investment
- Overall economic activity
IMPACT OF REPO RATE ON INDIAN ECONOMY
When Repo Rate Is Reduced
If RBI reduces repo rate, the following happens:
- Loans become cheaper.
- Home loans, car loans, and business loans have lower interest rates.
- People spend more.
- Companies invest more.
- Small businesses and farmers get easier access to credit.
- More money circulates in the economy.
- Economic growth increases.
This step is usually taken when growth is slow.
WHEN REPO RATE IS INCREASED
If RBI increases repo rate:
- Loans become expensive.
- EMI increases.
- Spending reduces.
- Inflation is controlled.
- Credit growth slows down.
- Foreign investors may invest more due to higher returns.
- Savings in banks increase.
- Rupee may strengthen.
This step is usually taken when inflation is high.
ABOUT MPC
The Monetary Policy Committee (MPC) is a six-member body of RBI.
Its main role is to decide:
- Repo rate
- Reverse repo rate
- Policy stance
Its main objective is:
- Maintain price stability
- Support economic growth
The MPC meets at least four times a year.
MEMBERS OF THE MPC
- Governor of RBI – Chairperson
- Deputy Governor in charge of monetary policy – Member
- One RBI official nominated by Central Board – Member
- 3 external experts nominated by Government of India – Members
This structure ensures balance between government and RBI in decision-making.
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