UPSC Prelims Practice Questions — RBI holds policy rate, FY26 inflation outlook seen at 2.1%

Q1. Under the statutory framework governing the Monetary Policy Committee (MPC), which of the following is/are NOT correctly identified as ex-officio or appointed members of the MPC?

  1. The Governor of the Reserve Bank of India
  2. The Deputy Governor of the RBI in charge of monetary policy
  3. The Finance Secretary, Ministry of Finance
  4. An officer of the Reserve Bank of India nominated by its Central Board
  • A. 1 and 3
  • B. 2 and 4
  • C. 3 only
  • D. 2, 3 and 4

Q2. The Monetary Policy Committee which decided to hold the policy repo rate at 5.25% in February 2026 derives its statutory basis from which one of the following provisions?

  • A. Section 17 of the Reserve Bank of India Act, 1934
  • B. Section 22 of the Reserve Bank of India Act, 1934
  • C. Section 45ZB of the Reserve Bank of India Act, 1934
  • D. Section 49 of the Reserve Bank of India Act, 1934

Q3. Who serves as the ex-officio Chairperson of the Monetary Policy Committee that announced the February 2026 monetary policy resolution?

  • A. The Governor of the Reserve Bank of India
  • B. The Union Finance Minister
  • C. The senior-most Deputy Governor of the Reserve Bank of India
  • D. The Chairperson of the Financial Stability and Development Council

Q4. With reference to the Flexible Inflation Targeting framework under which the Reserve Bank of India's February 2026 policy resolution was issued, which of the following statements are correctly identified?

  1. The CPI inflation target is 4% with a tolerance band of plus or minus 2 percentage points.
  2. Failure of the target is deemed to have occurred if average inflation breaches the tolerance band for three consecutive quarters.
  3. The Standing Deposit Facility (SDF) rate forms the floor of the Liquidity Adjustment Facility corridor, with the repo rate as the policy rate within the corridor.
  4. The inflation target is set by the Reserve Bank of India in consultation with the Central Government, and is reviewed every ten years.
  • A. 1, 2 and 3
  • B. 1, 2 and 4
  • C. 2 and 4 only
  • D. 1 and 3 only