The repo rate is the rate at which the RBI lends short-term money to banks against government securities; raising it makes loans dearer and cools inflation. Since 2016 it is set by the Monetary Policy Committee (MPC), created by an amendment to the RBI Act, with RBI members and external members appointed by the government; the chair has a casting vote.
Key facts
- The RBI Act was amended in May 2016 to create the MPC (Section 45ZB); the first MPC was constituted on 29 September 2016.
- Inflation target 4 percent CPI with a 2 to 6 percent band, retained for April 2026 to March 2031. (as of 23 Oct 2026)
- The SDF rate is 25 basis points below the repo rate (the floor, since April 2022) and the MSF rate 25 basis points above it (the ceiling).
- Quorum is four; each member has one vote and the chair a casting vote; minutes are published on the 14th day after the decision.
- External members: Nagesh Kumar, Saugata Bhattacharya and Ram Singh. (as of 23 Oct 2026)
Latest
On 7 October 2026 the MPC raised the repo rate by 25 basis points to 5.50 percent, the first hike since February 2023, and shifted its stance to 'calibrated tightening'; SDF 5.25 percent, MSF and Bank Rate 5.75 percent; next meeting 2 to 4 December 2026.
Why exams ask about it
After every policy, setters ask the new repo rate, which rate is 25 points above or below it, the MPC's size and the inflation target.
Pakka yaad trick
Corridor rhyme: SDF sits down (25 points below repo), MSF stands up (25 points above). Repo is the middle step.