UPSC Prelims Practice Questions — MPC retains repo rate, lowers growth forecast

Q1. Which one of the following best describes the Standing Deposit Facility (SDF) of the Reserve Bank of India?

  • A. An uncollateralised overnight liquidity absorption facility that forms the floor of the LAF corridor
  • B. An overnight collateralised lending facility against government securities that forms the ceiling of the LAF corridor
  • C. A variable-rate term repo operation used to inject durable liquidity into the banking system
  • D. A window that allows scheduled commercial banks to borrow overnight against their excess SLR holdings at the Bank Rate

Q2. Within the Monetary Policy Committee of the Reserve Bank of India, who serves as the ex-officio Chairperson?

  • A. The Governor of the Reserve Bank of India
  • B. The Deputy Governor of the RBI in charge of monetary policy
  • C. The Finance Secretary, Government of India
  • D. The Chief Economic Adviser to the Government of India

Q3. Under India's flexible inflation targeting framework, the inflation target in terms of the Consumer Price Index is formally notified in the Official Gazette by which one of the following?

  • A. The Reserve Bank of India, in consultation with the Central Government
  • B. The Central Government, in consultation with the Reserve Bank of India
  • C. The Monetary Policy Committee, with the prior concurrence of the Central Government
  • D. The Department of Economic Affairs, on the recommendation of the Financial Stability and Development Council

Q4. The Monetary Policy Committee of the Reserve Bank of India, which holds the policy repo rate at 5.25% in its June 2026 meeting, is constituted under which one of the following provisions?

  • A. Section 45ZA of the Reserve Bank of India Act, 1934
  • B. Section 45ZB of the Reserve Bank of India Act, 1934
  • C. Section 17 of the Reserve Bank of India Act, 1934
  • D. Section 21 of the Banking Regulation Act, 1949