UPSC Prelims Practice Questions — RBI’s MPC minutes indicate hardening of interest rates

Question 1

Consider the following statements regarding the functioning of the Monetary Policy Committee under the Reserve Bank of India Act, 1934:
1. The quorum for a meeting of the Committee is four members.
2. Every member has one vote, and in the event of an equality of votes the Governor has a second or casting vote.
3. The members appointed by the Central Government hold office for a period of four years.
4. The officer of the Reserve Bank who sits on the Committee is nominated to it by the Central Government.
Which of the statements given above is/are correct?

Accepted Answer

1, 2 and 3

Answer

1 and 2 only

Answer

2, 3 and 4

Answer

1 and 4 only

Question 2

Consider the following statements about India's flexible inflation targeting framework:
1. The inflation target currently in force was notified for the period from 1 April 2026 to 31 March 2031.
2. The target is notified by the Central Government in consultation with the Reserve Bank of India.
3. Where the target is not achieved, the Reserve Bank is required to submit its report directly to Parliament through the Ministry of Finance.
4. The target is expressed in terms of the Wholesale Price Index.
Which of the statements given above is/are correct?

Accepted Answer

1 and 2

Answer

2 and 3

Answer

1, 3 and 4

Answer

2 and 4

Question 3

Under the notified framework, the Reserve Bank of India is deemed to have failed to meet the inflation target when average inflation stays outside a tolerance level for at least how long?

Accepted Answer

Three consecutive quarters of average inflation outside the notified tolerance level

Answer

Two consecutive quarters of average inflation outside the notified tolerance level

Answer

Four consecutive quarters of average inflation outside the notified tolerance level

Answer

Two consecutive half-years of average inflation outside the notified tolerance level

Question 4

Consider the following statements comparing the August 2026 monetary policy review of the RBI with its immediately preceding June 2026 review:
1. The projection for CPI inflation for 2026-27 was lowered to 5.0 per cent in August 2026 from 5.1 per cent projected in June 2026.
2. The projection for real GDP growth for 2026-27 was raised to 6.7 per cent in August 2026 from 6.6 per cent projected in June 2026.
3. The August 2026 review abandoned the neutral stance for an accommodative one, the first such change of stance since the repo rate settled at 5.25 per cent.
Which of the statements given above is/are correct?

Accepted Answer

1 and 2 only

Answer

1 only

Answer

2 and 3 only

Answer

1, 2 and 3

Question 5

Once the Monetary Policy Committee decides the policy repo rate, that decision is operationalised in the overnight money market principally through which one of the following?

Accepted Answer

The Reserve Bank of India, through the Liquidity Adjustment Facility corridor bounded by the SDF and MSF rates

Answer

The Department of Economic Affairs, Ministry of Finance, through Ways and Means Advances extended to the Centre

Answer

The Securities and Exchange Board of India, through its regulation of the corporate bond and money market segments

Answer

The Financial Stability and Development Council, through the issue of securities under the Market Stabilisation Scheme

Question 6

Which one of the following members of the Monetary Policy Committee sits on it by virtue of being the Deputy Governor of the Reserve Bank of India holding charge of monetary policy?

Accepted Answer

Dr. Poonam Gupta, Deputy Governor, Reserve Bank of India

Answer

Prof. Ram Singh, Director, Delhi School of Economics

Answer

Dr. Nagesh Kumar, Director, Institute for Studies in Industrial Development

Answer

Shri Saugata Bhattacharya, Economist

Question 7

With reference to the minutes of the August 2026 meeting of the Monetary Policy Committee, released on 19 August 2026, consider the following:
1. Governor Sanjay Malhotra chaired the meeting and voted in favour of holding the policy repo rate.
2. Deputy Governor Poonam Gupta observed that a case for a rate hike may emerge during the course of the year.
3. Prof. Ram Singh is one of the three members appointed by the Central Government to the Committee.
4. Shri Indranil Bhattacharyya is one of the three members appointed by the Central Government to the Committee.
Which of the above is/are NOT correct?

Accepted Answer

4 only

Answer

1 only

Answer

3 and 4

Answer

2 and 4

Question 8

Consider the following statements about the policy repo rate of the Reserve Bank of India:
1. The repo rate was reduced by 25 basis points to 5.25 per cent from 5.50 per cent at the February 2026 review.
2. At its February 2026 review the Committee left the policy repo rate unchanged.
3. The August 2026 review was the fourth consecutive review at which the repo rate was left unchanged.
4. The meeting of the Committee scheduled immediately after the August 2026 review is to be held on 5-7 October 2026.
Which of the statements given above is/are correct?

Accepted Answer

2, 3 and 4

Answer

1, 2 and 3

Answer

1 and 4 only

Answer

3 and 4 only

Question 9

With reference to the monetary policy actions of the Monetary Policy Committee between December 2025 and August 2026, consider the following:
1. The policy repo rate stood at 6.00 per cent immediately before the December 2025 reduction.
2. The policy stance was retained as 'neutral' at the August 2026 review.
3. The February 2026 decision to leave the policy repo rate unchanged was unanimous.
4. Headline inflation has averaged about 2 per cent so far in the current year, as against 3.93 per cent in the preceding year.
Which of the above is/are NOT correct?

Accepted Answer

1 and 4

Answer

1 only

Answer

4 only

Answer

2, 3 and 4

Question 10

Following the August 2026 monetary policy review, how many of the following four rates stood at 5.50 per cent — the marginal standing facility rate, the bank rate, the standing deposit facility rate, and the policy repo rate?

Accepted Answer

Only two of them

Answer

Only one of them

Answer

Only three of them

Answer

All four of them

Question 11

The obligation on the Reserve Bank of India to publish, on the fourteenth day after every meeting of the Monetary Policy Committee, minutes recording the vote of each member ascribed to that member, is laid down in which one of the following?

Accepted Answer

Section 45ZL of the Reserve Bank of India Act, 1934

Answer

Section 45ZB of the Reserve Bank of India Act, 1934

Answer

Section 45ZN of the Reserve Bank of India Act, 1934

Answer

Section 45ZI of the Reserve Bank of India Act, 1934

UPSC Prelims Practice Questions — RBI’s MPC minutes indicate hardening of interest rates

Q3. Under the notified framework, the Reserve Bank of India is deemed to have failed to meet the inflation target when average inflation stays outside a tolerance level for at least how long?

Q5. Once the Monetary Policy Committee decides the policy repo rate, that decision is operationalised in the overnight money market principally through which one of the following?

Q6. Which one of the following members of the Monetary Policy Committee sits on it by virtue of being the Deputy Governor of the Reserve Bank of India holding charge of monetary policy?

Q10. Following the August 2026 monetary policy review, how many of the following four rates stood at 5.50 per cent — the marginal standing facility rate, the bank rate, the standing deposit facility rate, and the policy repo rate?

Q11. The obligation on the Reserve Bank of India to publish, on the fourteenth day after every meeting of the Monetary Policy Committee, minutes recording the vote of each member ascribed to that member, is laid down in which one of the following?