# Monetary Policy & the RBI for UPSC: MPC, Inflation Targeting, Repo, SDF, MSF, CRR, SLR & Oct 2026 Hike Source: https://tracknation.in/story/monetary-policy-the-rbi-for-upsc-mpc-inflation-targeting-repo-sdf-msf-crr-slr-oct-2026-hike (TrackNation β€” free UPSC notes with PYQs) > How India's monetary policy works β€” flexible inflation targeting (4% Β±2% to March 2031), the six-member MPC and its accountability, the LAF corridor of repo, SDF, MSF and Bank Rate, CRR, SLR, OMOs and swaps, stance and transmission, the 2025 easing cycle (repo cut to 5.25%, CRR to 3.0%) and the 7 October 2026 hike to 5.50% with a calibrated-tightening stance β€” with practice questions and real PYQs. ## Objectives, Inflation Targeting and the MPC 🎯 **Exam priority: High-yield.** *RBI instruments and the MPC are asked almost every year, and since 2023 UPSC wraps them in "how many of the above" and Statement-I/II questions where one wrong detail sinks you. Learn each instrument with its rate relationship (repo, SDF, MSF) and the 2025-26 policy path β€” then the October 2026 reversal.* In 2025 the RBI cut the repo rate by a full percentage point as inflation fell to 1.7 per cent. On 7 October 2026 it raised the rate and changed its stance to "calibrated tightening". Both moves come from one framework, which this note unpacks. ## What monetary policy is for - **Monetary policy** is the RBI's management of money supply, credit and interest rates to achieve its objectives: **price stability** while keeping in mind the objective of **growth** (the preamble of the RBI Act), with financial stability as the third pillar. It works through the interest-rate and liquidity channels; fiscal policy (taxes and spending) belongs to the government. - It matters because borrowing costs drive consumption and investment: lower policy rates β†’ cheaper loans β†’ more demand (and risk of inflation); higher rates β†’ the reverse. Expansionary = easing; contractionary = tightening. ## Flexible Inflation Targeting (FIT) and the MPC - The **Urjit Patel Committee (2014)** recommended a shift from the older "multiple indicators" approach to an explicit inflation target with **CPI** as the nominal anchor. A **Monetary Policy Framework Agreement** was signed between the Government and the RBI in **February 2015**; the **Finance Act 2016** amended the RBI Act (Chapter IIIF, ss.45ZA–45ZO) to make it statutory and create the Monetary Policy Committee. - **Who sets the target?** *Not the RBI* β€” the **Central Government**, in consultation with the RBI, once every five years (s.45ZA), in terms of **CPI (Combined)**. The target of **4% with a Β±2% tolerance band (2–6%)** was first set for 2016-21, retained in March 2021, and **renewed again by Gazette Notification S.O.1580(E) of 25 March 2026 for 1 April 2026 – 31 March 2031** (the second statutory review). - **Failure rule (s.45ZN):** if average inflation stays **above the upper band or below the lower band for three consecutive quarters**, the RBI must report to the Government the reasons, the remedial action and the time needed to return to target. | **Feature** | **Monetary Policy Committee (s.45ZB)** | | Size and composition | **Six members**: three from the RBI β€” the **Governor (chair)**, the **Deputy Governor in charge of monetary policy** and **one RBI officer** nominated by the Central Board β€” and **three external members appointed by the Central Government** (four-year term, not eligible for reappointment) | | Voting | One vote each; decisions by majority of members present and voting; the **Governor has a second (casting) vote** in a tie | | Meetings | At least **four times a year** (in practice six); quorum is four members including the Governor (or Deputy Governor in the Governor's absence) | | Transparency | Resolution published after each meeting; **minutes within 14 days**; a Monetary Policy Report twice a year | | What it decides | The **policy repo rate** required to achieve the inflation target | ## How India's Monetary Framework Evolved The framework did not appear overnight; each change answered a failure of the previous one. ## How India's monetary framework evolved | **Period** | **Approach** | **What drove the change** | | 1985 – 1997 | **Monetary targeting with feedback** (Chakravarty Committee, 1985): broad money (M3) growth was the intermediate target | The money-demand relationship became unstable as financial markets deepened and the economy opened up | | 1998 – 2015 | **Multiple indicators approach** (adopted in 1998-99 under Governor Bimal Jalan): interest rates, currency, credit, output, trade, fiscal position, inflation β€” all watched | Too many objectives; no clear anchor; inflation stayed high after 2008 | | June 2000 | **Liquidity Adjustment Facility** introduced (recommended by the Narasimham Committee on banking sector reforms, 1998; the full LAF began in June 2000) β€” repo/reverse repo become the main operating tools | Shift from direct controls to market-based instruments | | 2014 – 2016 | **Flexible inflation targeting**: Urjit Patel Committee (2014) β†’ Agreement (Feb 2015) β†’ Finance Act 2016 creates the MPC | Make the RBI accountable to a numeric, CPI-based target; reduce discretion of one person (the Governor) | | April 2022 | **Standing Deposit Facility** introduced as the floor of the corridor | Persistent surplus liquidity; RBI's stock of securities limited reverse repo | | March 2026 | Inflation target **renewed**: 4% Β±2% until March 2031 | Statutory five-year review | - **Functions of the RBI** that connect to monetary policy: issuer of currency, **banker to the Government** (manages public debt), **banker's bank and lender of last resort**, **regulator and supervisor** of banks and NBFCs, **manager of foreign-exchange reserves** and regulator of the payments system. - The **statutory limits** differ: the RBI Act (2006 amendment) removed any statutory floor or ceiling on the **CRR**, giving the RBI full flexibility, whereas the **SLR** has a statutory ceiling of **40%** of NDTL in the Banking Regulation Act. ## The Policy Corridor and the RBI's Instruments The MPC sets one number β€” the policy repo rate. Everything else on this page is how the RBI makes that number bite in the money market. ## The policy corridor: repo, SDF, MSF and Bank Rate - The **Liquidity Adjustment Facility (LAF)** is the RBI's day-to-day window for injecting or absorbing liquidity. Under **repo** (repurchase agreement) the RBI **lends** to banks against government securities at the **policy repo rate** β€” it injects liquidity. Under **reverse repo** the RBI **borrows** from banks (they park surplus funds) β€” it absorbs liquidity. - Since April 2022 the **Standing Deposit Facility (SDF)** has been the **floor** of the corridor: banks deposit surplus funds with the RBI **without any collateral** being given by the RBI, so absorption is not limited by the RBI's stock of securities. The **Marginal Standing Facility (MSF)** β€” an emergency overnight window in which banks can borrow, **dipping into their SLR securities** β€” is the **ceiling**. The **Bank Rate** is aligned with the MSF rate and is used mainly to compute penalties on shortfalls in CRR/SLR. - The corridor is **symmetric**: SDF = repo βˆ’ 25 bps; MSF = Bank Rate = repo + 25 bps. The **weighted average call rate (WACR)** β€” the overnight interbank rate β€” is the **operating target**; in 2025-26 it averaged about **8 basis points below the repo rate** because liquidity was in surplus. | **Date** | **Repo** | **SDF** | **MSF / Bank Rate** | **Stance** | | December 2025 (Economic Survey) | 5.25% | 5.00% | 5.50% | Neutral (since June 2025) | | **7 October 2026 (63rd MPC meeting)** | **5.50%** | **5.25%** | **5.75%** | **Calibrated tightening** | ## The other instruments - **Cash Reserve Ratio (CRR):** share of a bank's **net demand and time liabilities (NDTL)** that it must keep as cash with the RBI β€” **no interest** is paid on it. It was cut **100 bps to 3.0%** in a staggered manner in September–November 2025, releasing about **β‚Ή2.5 lakh crore** of *primary* liquidity. A CRR change works instantly because it changes lendable resources directly. - **Statutory Liquidity Ratio (SLR):** the share of NDTL banks must hold in **cash, gold or approved securities, with themselves** (not with the RBI) β€” currently **18%**, within a statutory ceiling of **40%** under the Banking Regulation Act. It also makes banks captive buyers of government bonds. - **Open Market Operations (OMO):** *outright* purchase or sale of government securities β€” **durable (permanent)** liquidity, unlike repo which is temporary. In April–May 2025 the RBI bought bonds worth **β‚Ή2.39 lakh crore** in nine OMO purchases; in December 2025 it added β‚Ή1 lakh crore of OMO purchases and a **3-year USD/INR buy-sell swap of USD 5 billion** (a forex swap injects rupee liquidity for three years). - **Market Stabilisation Scheme (MSS):** the RBI sells special government securities on behalf of the Government to **sterilise** large capital inflows β€” the money raised is parked with the RBI and not spent. - **Qualitative tools:** moral suasion, margin requirements and selective credit controls; and **variable-rate repo/reverse repo auctions (VRR/VRRR)** of various maturities to fine-tune liquidity. ## Stance, Transmission and the 2025–26 Cycle to the October 2026 Hike A policy-rate change is only useful if it reaches borrowers. Transmission, liquidity and the "stance" language decide how far and how fast. ## Stance and transmission - **Stance** is the MPC's signal about the *direction* of future policy: **accommodative** (rates more likely to fall), **neutral** (could go either way), **withdrawal of accommodation** or **calibrated tightening** (rates more likely to rise). It is distinct from the rate decision itself. - **Transmission:** repo rate β†’ money-market rates β†’ bank deposit and lending rates β†’ spending and investment β†’ inflation. Since October 2019 new floating-rate retail and MSME loans must be linked to an **external benchmark** such as the repo rate (EBLR), which made the pass-through faster than the old MCLR regime. - The Economic Survey notes **robust transmission** in 2025: in response to the 100-bps repo cut, the weighted average lending rate (WALR) on **fresh rupee loans fell 64 bps to 8.71%** and on **outstanding loans 56 bps to 9.21%** (November 2025) β€” the lowest since September 2022. - **Five channels of transmission:** the **interest-rate channel** (loan and deposit rates), the **credit channel** (banks' willingness and ability to lend), the **exchange-rate channel** (a rate hike tends to attract capital and strengthen the rupee, lowering imported inflation), the **asset-price channel** (equity/bond prices and wealth effects) and the **expectations channel** (a credible target anchors inflation expectations). Transmission is usually faster for loans linked to the repo rate and slower for fixed-rate loans and for deposits. - **Liquidity:** the system ran a **surplus** β€” net LAF averaged about **β‚Ή1.89 lakh crore** in FY26 (up to 8 January 2026) against just β‚Ή1,605 crore in FY25. Banks leaned on the SDF (average β‚Ή1.74 lakh crore, up from β‚Ή0.94 lakh crore) and used the MSF less (β‚Ή2,244 crore, down from β‚Ή6,902 crore). ## The 2025–26 cycle and the October 2026 turn | **When** | **What happened** | **Why** | | April–December 2025 | MPC cut the repo rate by a cumulative **100 bps** to **5.25%**; stance changed from *accommodative to neutral* in June 2025 | CPI inflation fell from 4.6% (2024-25) to 1.7% (April–December 2025) β€” the lowest average in the current CPI series | | Sep–Nov 2025 | CRR cut by 100 bps to 3.0% (125 bps in total since December 2024) | Release primary liquidity (~β‚Ή2.5 lakh crore) | | Apr–Dec 2025 | OMO purchases β‚Ή2.39 lakh crore (Apr–May) + β‚Ή1 lakh crore and a USD 5 bn 3-year swap (Dec) | Durable liquidity to support transmission | | **7 October 2026** | Repo **raised 25 bps to 5.50%**; SDF 5.25%; MSF/Bank Rate 5.75%; stance changed to **calibrated tightening**; 'rate cuts are off the table in the near term' | Inflation and its outlook 'no longer benign' β€” FY27 CPI projected at **5.2%** (real GDP growth **7.1%**, core inflation 4.4%) | - The lesson UPSC loves: a central bank **cuts when inflation is far below target and raises when the outlook worsens**; "growth" and "price stability" are traded off continuously, not once. ## Critique, Traps and Exam Angles Monetary policy has limits, and the exam asks about them in "statement" form. Here are the standard traps and the debates. ## Why inflation targeting β€” and its critiques - **Why a target?** A public, numeric target anchors inflation expectations and makes the RBI accountable. The target is set by the Government β€” so the elected government decides *what* to aim for, the technocratic MPC decides *how*. - **Critiques:** India's inflation is often driven by **food and fuel supply shocks**, which interest rates cannot fix; headline CPI carries a large food weight; and a single target can force tightening when growth is weak. The RBI's answer is the "flexible" in FIT β€” it can look through transitory shocks. - **Limits of monetary policy:** weak transmission when banks are stressed or deposits are scarce; the "liquidity trap"-like situation when rate cuts do not revive lending; and exchange-rate/capital-flow pressures (the "impossible trinity"). ## Common traps (and the correct statement) | **Trap** | **Correct statement** | | The MPC sets the inflation target | No β€” the **Central Government** notifies it, in consultation with the RBI, every five years | | Interest is paid on CRR balances | No interest is paid on CRR | | SLR is kept with the RBI | SLR assets are held **by the bank itself** (cash, gold, approved securities) | | MSF rate is below repo | MSF rate is **above** repo (repo + 25 bps); SDF is below | | NBFCs can use the LAF | The LAF is for scheduled commercial banks (excluding RRBs) and Primary Dealers β€” NBFCs have no direct access. *Caution: UPSC's official 2024 key (Q42) counted this statement as correct β€” presumably because Primary Dealers, which do have LAF access, are non-bank financial entities β€” while several coaching institutes marked it wrong. Read the exact wording in the exam.* | | A CRR cut lowers money supply | It frees lendable funds, so it **raises** credit and broad money, while mechanically lowering reserve money | | Repo and OMO are the same | Repo is temporary (reversed on a fixed date); an outright OMO is permanent | ## Why this matters for UPSC - Direct questions test instrument definitions and the corridor; current-affairs questions use the **latest MPC decision** (5.50% repo, calibrated tightening, the 4% Β±2% target) β€” expect the stance change in the 2027 paper. - For Mains, link monetary policy to growth, inflation, exchange rate (rate hikes support the rupee) and fiscal policy (crowding out; a high fiscal deficit complicates the MPC's task). ## Further Reading - NCERT Economics textbooks (Class 11–12), the Economic Survey, the Union Budget documents and RBI publications cited in this note β€” the primary sources behind every figure above. ## Test Yourself: Practice Questions & PYQs Twelve practice questions on the MPC, the corridor, the instruments and the policy path, followed by real UPSC questions on monetary policy. ## Practice Questions **Q1.** With reference to the Monetary Policy Committee (MPC) of the RBI, consider the following statements: 1. It has six members, three of whom are appointed by the Central Government. 2. The Governor of the RBI has a casting vote in the event of a tie. 3. The inflation target is set by the MPC. Which of the statements given above are correct? - (a) 2 and 3 only - (b) 1, 2 and 3 - (c) 1 only - (d) 1 and 2 only **Answer: (d)** β€” 1 and 2 are correct. The target is notified by the Central Government in consultation with the RBI (once every five years) β€” the MPC's task is to meet it. **Q2.** The inflation target notified for 1 April 2026 – 31 March 2031 is - (a) 4 per cent with a band of Β±1 per cent - (b) 4 per cent with a band of Β±2 per cent - (c) 3 per cent with a band of Β±1 per cent - (d) 5 per cent with a band of Β±1 per cent **Answer: (b)** β€” The Government renewed the 4% CPI target with a 2–6% tolerance band (Gazette S.O.1580(E), 25 March 2026) β€” the same as in 2016-21 and 2021-26. **Q3.** Under which of the following circumstances does the RBI have to report to the Government explaining its failure to meet the inflation target? - (a) When the repo rate is changed by more than 50 basis points - (b) When average inflation is outside the tolerance band for three consecutive quarters - (c) When inflation is above 4 per cent in any single month - (d) When the CRR is changed **Answer: (b)** β€” Section 45ZN: failure is defined as average inflation above the upper or below the lower tolerance level for three consecutive quarters. **Q4.** Consider the following statements regarding the Liquidity Adjustment Facility corridor: 1. The SDF rate is set below the repo rate. 2. The MSF rate is set above the repo rate. 3. The Standing Deposit Facility requires the RBI to provide government securities as collateral. Which of the statements given above are correct? - (a) 2 and 3 only - (b) 1 and 2 only - (c) 1 and 3 only - (d) 1, 2 and 3 **Answer: (b)** β€” SDF = repo βˆ’ 25 bps (floor), MSF = repo + 25 bps (ceiling). The SDF is a collateral-free deposit facility β€” that is its advantage over reverse repo β€” so 3 is wrong. **Q5.** Statement-I: A cut in the Cash Reserve Ratio increases the lending capacity of banks immediately. Statement-II: Banks do not earn interest on balances maintained as CRR with the RBI. Which one of the following is correct in respect of the above statements? - (a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I - (b) Statement-I is correct but Statement-II is not correct - (c) Both Statement-I and Statement-II are correct but Statement-II does not explain Statement-I - (d) Statement-I is not correct but Statement-II is correct **Answer: (c)** β€” Both are true. CRR balances earn nothing, which is why they are 'idle' money β€” but Statement-II is not the reason a CRR cut raises lending; the reason is that a lower CRR releases funds that banks can lend. **Q6.** Which of the following is/are quantitative instruments of monetary policy? 1. Cash Reserve Ratio 2. Open Market Operations 3. Moral suasion 4. Margin requirements - (a) 3 and 4 only - (b) 1, 2 and 3 - (c) 1 and 2 only - (d) 1, 2, 3 and 4 **Answer: (c)** β€” CRR and OMOs change the amount of money/credit; moral suasion and margin requirements are qualitative tools. **Q7.** 'Open Market Operations' differ from 'repo operations' because OMOs - (a) are carried out only with commercial banks - (b) are reversed within one day - (c) are used only to change the CRR - (d) involve an outright purchase or sale of securities and so provide durable liquidity **Answer: (d)** β€” A repo is a sale/purchase with an agreement to reverse it; an outright OMO transfers the securities for good β€” durable (permanent) liquidity. **Q8.** In India, the weighted average call rate (WACR) is - (a) the operating target of monetary policy, which the RBI tries to keep close to the policy repo rate - (b) the rate fixed by the Finance Ministry for small savings - (c) the rate at which banks lend to their best borrowers - (d) the rate at which the RBI lends to the Government **Answer: (a)** β€” The WACR is the overnight interbank rate; the Economic Survey says it averaged about 8 bps below the repo rate in 2025-26 because of surplus liquidity. **Q9.** Which of the following describes the 2025-26 easing cycle correctly, according to the Economic Survey? 1. The repo rate was cut cumulatively by 100 basis points between April and December 2025. 2. The CRR was reduced to 3.0 per cent of NDTL. 3. The MPC changed its stance from neutral to accommodative in June 2025. - (a) 2 and 3 only - (b) 1, 2 and 3 - (c) 1 and 2 only - (d) 1 and 3 only **Answer: (c)** β€” The stance moved from ACCOMMODATIVE to NEUTRAL in June 2025, so 3 is reversed. **Q10.** On 7 October 2026 the Monetary Policy Committee - (a) kept the repo rate at 5.25 per cent and changed the stance to accommodative - (b) cut the repo rate to 5.00 per cent and kept a neutral stance - (c) raised the CRR to 4 per cent - (d) raised the repo rate by 25 bps to 5.50 per cent and changed the stance to calibrated tightening **Answer: (d)** β€” The 63rd MPC meeting (5–7 October 2026) raised the repo rate to 5.50%, with SDF at 5.25% and MSF/Bank Rate at 5.75%, citing a deteriorating inflation outlook (FY27 CPI projected at 5.2%). **Q11.** The Statutory Liquidity Ratio (SLR) has to be maintained by banks in the form of - (a) cash, gold or approved securities held by the bank itself - (b) cash with the RBI only - (c) loans to priority sectors - (d) foreign currency deposits abroad **Answer: (a)** β€” Unlike the CRR, SLR assets are held by the bank itself; they include G-secs and state development loans. **Q12.** Which one of the following best explains why a fall in the policy repo rate can raise inflation? - (a) It reduces the cost of borrowing, raising spending and investment demand - (b) It reduces the money supply - (c) It raises the cost of imported goods - (d) It lowers the fiscal deficit **Answer: (a)** β€” A lower repo rate transmits to cheaper loans, raising demand; if supply cannot keep pace, prices rise β€” the reason the MPC raised rates in October 2026 once the outlook worsened. ### UPSC Previous Year Questions (PYQs) *Real UPSC Prelims questions, checked against the official paper and answer key.* **Q1.** (2022) 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 government securities. 2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market. 3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars. Which of the statements given above are correct? - (a) 1, 2 and 3 - (b) 1 and 2 only - (c) 1 and 3 only - (d) 2 and 3 only **Answer: (d)** β€” To fight high inflation the RBI SELLS securities to absorb liquidity (statement 1 is wrong). To stop a rapidly depreciating rupee it sells dollars (2 βœ”). If US/EU rates fall, capital flows into India and the rupee tends to rise, so the RBI buys dollars to prevent excess appreciation (3 βœ”). **Q2.** (2023) Which one of the following activities of the Reserve Bank of India is considered to be part of 'sterilization' ? - (a) Oversight of settlement and payment systems - (b) Conducting 'Open Market Operations' - (c) Regulating the functions of Non-banking Financial Institutions - (d) Debt and cash management for the Central and State Governments **Answer: (b)** β€” Sterilisation neutralises the liquidity created when the RBI buys foreign exchange β€” it sells government securities through open market operations (or MSS) to mop up the rupees. **Q3.** (2023) Correct the following statements: Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes. Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means. Which one of the following is correct in respect of the above statements? - (a) Statement-I is incorrect but Statement-II is correct - (b) Statement-I is correct but Statement-II is incorrect - (c) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I - (d) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I **Answer: (c)** β€” Central banks across the world raised rates after the pandemic (Statement I βœ”) because they believe monetary tightening can bring down consumer-price inflation (Statement II βœ”) β€” and II is exactly why they hiked, so II explains I. **Q4.** (2019) Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? - (a) Easing conditions relating to external commercial borrowing - (b) Curbing imports of non-essential goods-and promoting exports - (c) Following an expansionary monetary policy - (d) Encouraging Indian borrowers to issue rupee denominated Masala Bonds **Answer: (c)** β€” To stop the rupee sliding, authorities curb non-essential imports, promote exports, attract capital (masala bonds, easier ECB rules). An expansionary monetary policy (cutting rates, adding liquidity) would weaken the rupee further β€” so it is the measure NOT used. **Q5.** (2022) In India, which one of the following is responsible for maintaining price stability by controlling inflation? - (a) Department of Consumer Affairs - (b) Financial Stability and Development Council - (c) Expenditure Management Commission - (d) Reserve Bank of India **Answer: (d)** β€” Under the inflation-targeting framework the RBI (through the MPC) is responsible for price stability, with a target set by the Government. **Q6.** (2021) Consider the following statements: 1. The Governor of the Reserve bank of India (RBI) is a appointed by the Central Government. 2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in public interest. 3. The Governor of the RBI draws his power from the RBI Act. Which of the above statements are correct? - (a) 1, 2 and 3 - (b) 1 and 2 only - (c) 1 and 3 only - (d) 2 and 3 only **Answer: (c)** β€” The Governor is appointed by the Central Government (1 is right) and his powers flow from the RBI Act, 1934 (3 is right). The Centre's power to give directions to the RBI in the public interest is in section 7 of that Act, not in any provision of the Constitution (2 is wrong). **Q7.** (2021) In India, the central bank's function as the 'lender of last resort' usually refers to which of the following? 1. Lending to trade and industry bodies when they fail to borrow from other sources 2. Providing liquidity to the banks having a temporary crisis 3. Lending to governments to finance budgetary deficits Select the correct answer using the code given below. - (a) 3 only - (b) 2 only - (c) 2 and 3 - (d) 1 and 2 **Answer: (b)** β€” Lender of last resort means the central bank supplies emergency liquidity to banks that face a temporary shortage they cannot cover from the market (statement 2). Lending to trade bodies or financing the government's deficit is not that function. ### Mains Practice Questions Use these to frame full-length answers. You don't have to answer one exactly β€” they show the angles UPSC tests, so let them guide which points you cover. - Describe the monetary policy framework in India β€” who sets the inflation target, what does the MPC do and how is accountability ensured? - Explain the policy corridor of the RBI with the roles of repo, SDF, MSF and Bank Rate. Why was the SDF introduced? - Distinguish between CRR, SLR and OMO as instruments. Which are used to inject durable liquidity? - Critically examine the 2025 easing cycle and the October 2026 policy reversal β€” what drove each and what are the transmission challenges? ### UPSC Mains β€” Previous Years’ Questions on this topic (last 10 years) These are the **actual GS Mains questions** UPSC has asked on this theme β€” real proof of how, and when, it is tested. Try to write a full answer to each. - 2024 (GS-III): What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation.