RBI Announce 55th Monetary Policy Committee Meeting (June 2025)

Next Meeting Date

GDP Growth Forecast

Inflation Forecast (CPI) – Revised Downward

FY26 CPI Inflation now projected at 3.7%, down from 4.0%.

Who are members of the RBI MPC?

Section 45ZB of the amended RBI Act, 1934 provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government by notification in the Official Gazette. The first such MPC was constituted on September 29, 2016. The present MPC members, as notified by the Central Government in the Official Gazette of October 1, 2024, are as under:

• Governor of the Reserve Bank of India—Chairperson, ex officio;
• Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy—Member, ex officio;
• One officer of the Reserve Bank of India to be nominated by the Central Board—Member, ex officio;
• Dr. Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development, New Delhi — Member;
• Shri Saugata Bhattacharya, Economist — Member; and
• Prof. Ram Singh, Director, Delhi School of Economics, University of Delhi —Member

(Members referred to at 4 to 6 above, will hold office for a period of four years or until further orders, whichever is earlier)

• The MPC determines the policy repo rate required to achieve the inflation target.
• The MPC is required to meet at least four times in a year. The quorum for the meeting of the MPC is four members.
• Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.
• Each Member of the Monetary Policy Committee writes a statement specifying the reasons for voting in favour of, or against the proposed resolution.

RBI Instruments of Monetary Policy

Repo Rate

The Repo Rate is the interest rate at which the Reserve Bank of India lends short-term funds to commercial banks under the Liquidity Adjustment Facility (LAF), using government and other approved securities as collateral. It serves as the primary monetary policy tool for regulating inflation and managing liquidity in the economy. When the repo rate is increased, borrowing becomes more expensive, which helps control inflation. Conversely, a reduction in the repo rate makes borrowing cheaper, encouraging lending and investment, thus stimulating economic growth.

Standing Deposit Facility (SDF) Rate

The Standing Deposit Facility (SDF) Rate is the interest rate at which the RBI accepts uncollateralised overnight deposits from commercial banks. Introduced in April 2022, it replaced the fixed reverse repo rate as the floor of the LAF corridor. The SDF rate is placed 25 basis points below the policy repo rate. It plays a dual role by not only absorbing surplus liquidity but also contributing to overall financial stability, allowing banks to deposit excess funds with the central bank without requiring securities.

Marginal Standing Facility (MSF) Rate

The Marginal Standing Facility (MSF) Rate is a penal rate at which banks can borrow funds overnight from the RBI by dipping into their Statutory Liquidity Ratio (SLR) holdings, up to a predefined limit (usually 2%). This facility acts as a last-resort mechanism to manage unexpected liquidity pressures in the banking system. The MSF rate is set 25 basis points above the repo rate and serves as the upper bound or ceiling of the LAF corridor.

Liquidity Adjustment Facility (LAF)

The Liquidity Adjustment Facility (LAF) comprises the RBI’s tools to either inject or absorb liquidity in the banking system. It includes overnight and term repo/reverse repo operations at fixed and variable rates, as well as the SDF and MSF. In addition to LAF operations, the RBI also utilizes instruments such as open market operations (OMOs), forex swaps, and the Market Stabilisation Scheme (MSS) for effective liquidity management.

LAF Corridor

The LAF Corridor is the range within which the RBI allows overnight money market interest rates to fluctuate. The corridor has the Marginal Standing Facility (MSF) rate as the upper bound, the Standing Deposit Facility (SDF) rate as the lower bound, and the policy repo rate at its midpoint. This structure helps guide short-term interest rates and ensures the smooth functioning of the monetary transmission mechanism.

Main Liquidity Management Tool

The main liquidity management tool of the RBI is the 14-day term repo or reverse repo auction conducted at a variable rate. These operations are aligned with the cash reserve ratio (CRR) maintenance cycle and serve to manage the routine liquidity requirements of the banking system. This is the RBI’s principal method for fine-tuning liquidity in normal market conditions.

Fine Tuning Operations

Fine tuning operations are supplementary liquidity measures taken by the RBI to address short-term and unforeseen liquidity fluctuations. These include overnight or longer-tenor repo/reverse repo auctions. If needed, the RBI may also conduct variable rate repo/reverse repo auctions with tenors exceeding 14 days. These operations help maintain liquidity conditions within the desired corridor.

Reverse Repo Rate

The Reverse Repo Rate is the interest rate at which the RBI absorbs liquidity from commercial banks by accepting deposits backed by government securities. Though it remains part of the LAF framework, its role has been altered since the introduction of the SDF. The RBI now uses fixed-rate reverse repo operations at its discretion, depending on prevailing liquidity and policy needs.

Bank Rate

The Bank Rate is the rate at which the RBI is willing to buy or rediscount bills of exchange and other commercial instruments. It also acts as a penal rate charged to banks for failing to maintain statutory reserve requirements like the CRR and SLR. Published under Section 49 of the RBI Act, 1934, the Bank Rate has been aligned with the MSF rate and changes automatically with adjustments to the repo rate.

Cash Reserve Ratio (CRR)

The Cash Reserve Ratio (CRR) is the minimum average daily balance that commercial banks are required to maintain with the RBI as a percentage of their net demand and time liabilities (NDTL), as of the last Friday of the second preceding fortnight. The CRR is a tool used to control the money supply and liquidity in the economy by restricting the amount of funds available for lending.

Statutory Liquidity Ratio (SLR)

The Statutory Liquidity Ratio (SLR) mandates that banks maintain a certain percentage of their net demand and time liabilities (NDTL) in the form of liquid assets such as unencumbered government securities, cash, or gold. Like CRR, the SLR helps in regulating credit growth, ensuring bank solvency, and controlling inflation.

Open Market Operations (OMOs)

Open Market Operations (OMOs) refer to the outright purchase or sale of government securities by the RBI in the open market. These operations are aimed at injecting or absorbing long-term liquidity in the banking system. When the RBI buys securities, it infuses liquidity; when it sells, it absorbs liquidity. OMOs are a critical component of the RBI’s toolkit for durable liquidity management.