UPSC PracticeUPSC Practice
UPSC Notes

Monetary Policy Committee (MPC) and Key Policy Rates

PYQs

8

Articles

1

Momentum

21

Phase IFoundation

Background

Overview

Understanding the MPC's role, its decision-making process, and the impact of various policy rates on inflation, economic growth, and financial stability is fundamental for analyzing India's economic governance and policy effectiveness.

The Monetary Policy Committee (MPC) is a statutory body of the Reserve Bank of India (RBI) responsible for fixing the benchmark interest rate (repo rate) to achieve the inflation target. Key policy rates like the repo rate, Standing Deposit Facility (SDF), Marginal Standing Facility (MSF), and bank rate are instruments used to manage liquidity and influence credit conditions in the economy.

Phase IIStatic core

Facts & tables

Key facts

Composition of MPC

6 members (3 from RBI, 3 appointed by the Government of India)

Repo Rate

The rate at which the RBI lends money to commercial banks against government securities.

Standing Deposit Facility (SDF)

A facility allowing banks to deposit funds with the RBI without collateral, earning interest.

Monetary Policy Stance

Indicates the future direction of monetary policy (e.g., neutral, accommodative, withdrawal of accommodation).

Reference table

Static syllabus anchors

TypeReference
Conceptual areaMonetary Policy Framework

Reference table

Institutions & roles

BodyRole
Reserve Bank of India (RBI)Implements
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Conceptual understanding

Prelims angle: Cause and effect relationships

Quick revision

  • MPC: 6 members, statutory body for inflation targeting.
  • Primary objective: maintain price stability (4% +/- 2% CPI inflation).
  • Key rates: Repo, SDF, MSF, Bank Rate.
  • Repo rate: benchmark for short-term lending to banks.
  • Stance: neutral, accommodative, withdrawal of accommodation.

High-confidence PYQs

2022Multi-statement analysis, Conceptual understanding

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question
2021Multi-statement analysis, Conceptual understanding

India Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve. 2. Actions of the Reserve Bank of Ind...

EconomyOpen question
2020Conceptual understanding, Cause and effect relationships

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. In...

EconomyOpen question

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

EconomyOpen question
2020Multi-statement analysis, Conceptual understanding

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. In...

EconomyOpen question

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

EconomyOpen question
2017Statement-based questions, Factual recall

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? 1. It decides the RBI’s benchmark interest rates. 2. It is a...

EconomyOpen question
2015Conceptual understanding, Multi-statement analysis

With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are...

EconomyOpen question
2014Terminology-based question, Conceptual understanding

The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in the news, are used in relation to

EconomyOpen question
2013Conceptual understanding, Institutional roles and functions

An increase in the Bank Rate generally indicates that the:

EconomyOpen question

Topic timeline

Monetary Policy Framework
Prelims 2013· Conceptual understanding, Institutional roles and functions

An increase in the Bank Rate generally indicates that the:

Open question
Prelims 2014· Terminology-based question, Conceptual understanding

The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in the news, are used in relation to

Open question
Prelims 2015· Conceptual understanding, Multi-statement analysis

With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are...

Open question
Prelims 2017· Statement-based questions, Factual recall

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? 1. It decides the RBI’s benchmark interest rates. 2. It is a...

Open question
Prelims 2020· Conceptual understanding, Cause and effect relationships

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. In...

Open question

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

Open question
Prelims 2020· Multi-statement analysis, Conceptual understanding

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. In...

Open question

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

Open question
Prelims 2021· Multi-statement analysis, Conceptual understanding

India Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve. 2. Actions of the Reserve Bank of Ind...

Open question
Prelims 2022· Multi-statement analysis, Conceptual understanding

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

RBI MPC keeps policy rate unchanged at 5.25%

05 Aug 2026 · The MPC sets the repo rate to control inflation, using other rates like SDF and MSF to manage liquidity in the banking system. Its stated stance signals the future direction of monetary policy, impacting overall economic activity and credit conditions.

Read article

Related topics

Current topic

Monetary Policy Committee (MPC) and Key Policy Rates

Often confused with

Inflation Dynamics and Management in India

Open notes

Practice writing on this topic

UPSC has asked 8 linked questions on Monetary Policy Committee (MPC) and Key Policy Rates in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer

UPSC Prelims PYQs on Monetary Policy Committee (MPC) and Key Policy Rates

Practice official previous year questions asked by UPSC related to this concept.

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. In...

2020·Economy
Solve

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? 1. It decides the RBI’s benchmark interest rates. 2. It is a...

2017·Economy
Solve

Consider the following statements: 1. The weightage of food in Consumer Price Index (CPI) is higher than that in Wholesale Price Index (WPI). 2. The WPI doe...

2020·Economy
Solve

India Government Bond Yields are influenced by which of the following? 1. Actions of the United States Federal Reserve. 2. Actions of the Reserve Bank of Ind...

2021·Economy
Solve

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

2022·Economy
Solve

With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are...

2015·Economy
Solve

The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in the news, are used in relation to

2014·Economy
Solve

An increase in the Bank Rate generally indicates that the:

2013·Economy
Solve

Editorial & Review Process

Every revision note and practice question on UPSC Practice is researched using authoritative primary sources and reviewed for factual accuracy, syllabus relevance, and exam value. Read our Editorial Policy.

Verified Quality
Browse all topics