The Reserve Bank of India's Monetary Policy Committee began a three-day meeting under Governor Sanjay Malhotra amid widespread market expectations of a repo rate cut — potentially the first since the current rate cycle began. The MPC, which comprises six members, will announce its decision on the repo rate, inflation outlook, and growth projections. This meeting is closely watched as global uncertainty and domestic growth concerns have shifted the policy debate toward easing.

The MPC operates under India's flexible inflation targeting framework, mandated by the RBI Act (amended 2016), with a target of 4% CPI inflation within a tolerance band of +/- 2%. The repo rate — the rate at which RBI lends overnight to commercial banks — is the primary policy instrument. Changes transmit through the Liquidity Adjustment Facility (LAF) corridor: the repo rate sits in the middle, the Standing Deposit Facility (SDF) forms the floor, and the Marginal Standing Facility (MSF) forms the ceiling.

When the MPC cuts the repo rate, borrowing becomes cheaper for banks, reducing lending rates across the economy. This stimulates credit growth, investment, and consumption — eventually lifting GDP. For NABARD's agricultural refinancing, a repo cut typically reduces NABARD's own cost of borrowing, which can lower refinancing rates offered to cooperative banks and Regional Rural Banks.

The MPC has six members: three from the RBI (Governor as chairperson, Deputy Governor in charge of monetary policy, and one RBI officer) and three external members appointed by the Government for four-year terms. Decisions require a majority vote; in case of a tie, the Governor has a casting vote. The committee must meet at least four times a year, and minutes are published 14 days after each meeting. Understanding transmission lag — typically 2–3 quarters — is critical for exam questions on why a rate cut does not immediately reduce inflation or boost credit.