Minutes of the Monetary Policy Committee Meeting, April 6 to 8, 2026

The 60th meeting of the Monetary Policy Committee (MPC), held during April 6–8, 2026, unanimously voted to keep the policy repo rate unchanged at 5.25%, main...

What Happened

The 60th meeting of the Monetary Policy Committee (MPC), held during April 6–8, 2026, unanimously voted to keep the policy repo rate unchanged at 5.25%, maintaining the neutral stance.
The Standing Deposit Facility (SDF) rate remains at 5.00% and the Marginal Standing Facility (MSF) and Bank Rate at 5.50%.
The MPC revised its FY27 GDP growth forecast downward to 6.9% (from an estimated 7.6% in FY26) and set headline CPI inflation forecast at 4.6% for FY27, up from 2.1% in FY26.
All six members — three RBI and three government-nominated — voted in favour of the hold, with no dissent.
The West Asia conflict was identified as the dominant supply shock, creating simultaneous inflation risk and growth headwinds.

Static Topic Bridges

Section 45ZB of the RBI Act, 1934 — The MPC's Legal Basis

The Monetary Policy Committee is constituted under Section 45ZB of the Reserve Bank of India Act, 1934, as amended in 2016. The amendment provided statutory backing for a formal inflation-targeting framework, replacing the earlier discretionary approach under which the RBI Governor alone set the policy rate. The MPC has six members: the RBI Governor (Chairperson), the Deputy Governor in charge of monetary policy, one RBI Board-nominated official, and three independent members nominated by the Central Government. Decisions are made by majority vote; the Governor holds a casting vote in case of a tie.

Section 45ZB: Constitutional provision for the MPC under Chapter IIIF of the RBI Act
Composition: 3 RBI officials + 3 Government nominees = 6 members total
Voting: Simple majority; Governor's casting vote breaks ties
Meetings: At least 4 times per year (bi-monthly schedule currently followed)

Connection to this news: The April 2026 meeting was the 60th MPC meeting, with all 6 members voting unanimously — a rare consensus that signals broad institutional agreement on the "wait and watch" approach amid geopolitical uncertainty.

Flexible Inflation Targeting (FIT) Framework

India formally adopted the Flexible Inflation Targeting framework via an amendment to the RBI Act in May 2016 (Finance Act, 2016 — sometimes referred to as FLERDA). Under FIT, the Central Government, in consultation with the RBI, sets a CPI inflation target every five years. The current target is 4% with an upper tolerance of 6% and a lower tolerance of 2% (i.e., 4% ± 2%). If inflation breaches either limit for three consecutive quarters, the MPC must report to the government on the reasons and remedial steps — this is the "failure" accountability mechanism.

Inflation target: 4% CPI (headline), tolerance band 2%–6%
Original notification: August 5, 2016; renewed for April 2021–March 2026 cycle
Failure threshold: Three consecutive quarters outside the 2%–6% band
Core legal basis: Section 45ZA (target), 45ZB (MPC), 45ZC–45ZM (other provisions)

Connection to this news: At 4.6% for FY27, the RBI's own projection is within the tolerance band but above target, justifying the hold rather than either a cut or a hike. Q3 FY27 inflation is projected at 5.2%, approaching the upper band, which is why the MPC emphasized monitoring rather than easing.

Supply Shocks vs. Demand-Pull Inflation — Monetary Policy Response

A supply shock (e.g., energy price spike due to conflict) raises prices without expanding aggregate demand, creating a dilemma for central banks: raising rates would contain inflation but worsen the growth slowdown caused by the same shock. Standard monetary theory recommends "looking through" temporary supply shocks if inflation expectations remain anchored, reserving rate changes for persistent demand-driven inflation. This is the "prudent patience" logic that underpinned the MPC's unanimous hold.

Supply shock channels in this case: crude oil disruption, freight costs, Strait of Hormuz passage risks
West Asia accounts for ~1/6 of India's exports, ~1/5 of imports, ~50% of crude oil, ~40% of fertiliser imports
Second-round effects: supply shock raising input costs → wage demands → broader inflation spiral (what the MPC was monitoring for)
Neutral stance: preserves flexibility to move in either direction as data evolves

Connection to this news: One member specifically advocated a "dovish pause" to support MSMEs bearing higher working capital costs from input price spikes — illustrating how supply shocks strain small enterprises even before they feed into consumer prices.

El Niño and Its Impact on India's Inflation

El Niño refers to anomalous warming of the central and eastern equatorial Pacific Ocean, which typically reduces monsoon rainfall over South Asia, affecting kharif crop output and food prices. In India, food inflation — particularly vegetables, pulses, and cereals — is highly sensitive to monsoon performance, and food articles carry roughly 46% weight in the CPI basket.

Food and Beverages: ~45.86% weight in headline CPI (2011-12 base)
El Niño years correlate with below-normal southwest monsoon over India (June–September)
2023 saw a severe El Niño event; a potential recurrence in 2026 was flagged as an upside risk
Core inflation (excluding food and fuel) was projected at 4.4% for FY27

Connection to this news: The MPC flagged weather disturbances — specifically a potential El Niño — as a risk that could push Q3 FY27 food inflation higher, compounding the energy price shock from the West Asia conflict.

Key Facts & Data

Policy repo rate: 5.25% (unchanged, neutral stance)
SDF rate: 5.00% | MSF/Bank Rate: 5.50%
FY27 GDP forecast: 6.9% (Q1: 6.8%, Q2: 6.7%, Q3: 7.0%, Q4: 7.2%)
FY27 CPI forecast: 4.6% (Q1: 4.0%, Q2: 4.4%, Q3: 5.2%, Q4: 4.7%)
FY27 core CPI: 4.4%
Vote: 6–0 unanimous hold
Statutory basis: Section 45ZB, RBI Act, 1934
West Asia conflict impact: affects ~50% of India's crude oil imports and ~40% of fertiliser imports
FY26 CPI (actual): 2.1% — well below target; FY27 expected to reverse sharply upward