The MPC's 63rd meeting (October 5–7, 2026), chaired by Governor Sanjay Malhotra, unanimously voted to raise the policy repo rate by 25 basis points to 5.50 per cent. The SDF rate moves to 5.25 per cent and the MSF rate and Bank Rate to 5.75 per cent. The stance shifted from neutral to calibrated tightening, ruling out near-term rate cuts. CPI inflation is projected at 5.2 per cent for 2026-27; real GDP growth is projected at 7.1 per cent.

This MPC decision illustrates the classic monetary policy transmission chain that examiners test repeatedly. When the repo rate rises, commercial banks face a higher cost of borrowing from the RBI under the LAF. This pushes up lending rates across the economy, cooling credit demand, investment, and consumption — the demand-side channel of monetary tightening. The LAF corridor is defined by the SDF at the floor (25 bps below repo) and the MSF at the ceiling (25 bps above repo), maintaining a symmetric 50 bps corridor.

The shift to 'calibrated tightening' is a specific stance: it signals that rate cuts are categorically off the table in the near term, but the next move could be either a pause or a hike depending on incoming data. This is distinct from 'withdrawal of accommodation' (which allows cuts over time) or 'neutral' (which allows movement in either direction). The two dissenting members on the stance question — Dr. Nagesh Kumar and Prof. Ram Singh — preferred to retain the neutral stance, showing the MPC is not unanimous on the pace of tightening even when unanimous on the rate hike.

The inflation logic here is important: headline CPI at 4.8 per cent (August 2026) is above the 4 per cent target midpoint, with core inflation at 4.2 per cent signalling demand-side broadening. The MPC is acting pre-emptively against second-round effects. For NABARD aspirants, a higher repo rate raises NABARD's refinancing cost, potentially tightening agricultural credit availability at the margin.