Economics · Monetary Policy
If the CPI inflation remains above the upper tolerance limit of 6 per cent for three consecutive quarters, what mandatory, formal action is the RBI required to take under the Flexible Inflation Targeting (FIT) framework?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Governor must resign immediately.
- 2The RBI must write a formal report to the Government of India explaining the reasons for failure, remedial actions planned, and the estimated time frame to restore inflation to the target.✓
- 3The entire Monetary Policy Committee (MPC) must be dissolved and reconstituted.
- 4The government must immediately impose a complete freeze on all lending activities by commercial banks.
Correct answer
The RBI must write a formal report to the Government of India explaining the reasons for failure, remedial actions planned, and the estimated time frame to restore inflation to the target.
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