RBI Annual Report 2025-26

Source: RBI

Context:

The Reserve Bank of India has released its Annual Report 2025-26, a statutory report of its Central Board of Directors covering its working and functions from April 2025 to March 2026. The report shows an Indian economy that grew at 7.6 per cent, with sharp food deflation pulling CPI to 2.1 per cent, alongside a depreciating rupee, FPI outflows, falling Sensex, a widening trade deficit cushioned by services and remittances, and an RBI that cut the policy repo rate by 100 bps to 5.25 per cent while running a larger balance sheet (26.4 per cent of GDP) through the West Asia conflict-driven external stress.

PART ONE: THE ECONOMY

Chapter I: Taking Stock and Looking Forward

The World Economy

Worldwide output expanded 3.4% during 2025, a touch above the 3.3% recorded in 2024. The year was a tug-of-war: steep tariffs, mounting public debts, and murky trade rules dragged on activity, while early stockpiling of imports ahead of tariffs, the reshaping of supply chains, and a wave of AI-driven technology spending propped it up. Once hostilities erupted in West Asia in the final days of February 2026, the IMF trimmed its 2026 global growth call to 3.1%.

Trade told a similar story. The total volume of goods and services traded across borders climbed 5.1% in 2025. Goods led with 4.6% growth as firms loaded up on technology inventory, whereas services cooled to 5.3% once the rush of post-pandemic travel ran its course. For 2026, the IMF anticipates a marked slowdown to 2.8%.

On prices, global inflation drifted down to 4.1% over 2025. With the West Asian flare-up snarling shipping lanes and supply networks, however, the Fund nudged its 2026 inflation projection up to 4.4%.

India’s Economy

India held on to its title as the quickest-expanding major economy. Real GDP rose 7.6% in 2025-26, building on the prior year’s 7.1%, with buoyant household demand and dependable investment doing the heavy lifting. Looking to 2026-27, growth is pencilled in at 6.9%, though the balance of risks tilts downward given the threat of dearer freight and energy from overseas.

Inflation eased dramatically. Headline CPI cooled to 2.1% in 2025-26 from 4.6% a year earlier, almost entirely because food turned cheaper. The forecast for 2026-27 sits at 4.6%, with risks pointing higher.

Chapter II: The Economy in Detail

The Real Economy

On the demand side, consumer spending continued to anchor the economy. It quickened to 7.7% in 2025-26 from 5.8%, lifted by firm appetite in both rural and urban markets. Investment in physical assets such as plants and machinery advanced a healthy 7.1%, and the broader investment-to-GDP ratio held firm at 34.3% in 2024-25.

Savings improved as well. National savings reached 34.2% of disposable income in 2024-25, households’ net financial savings edged up to 7.0%, and the government’s shortfall between earning and spending narrowed to 4.6% of GDP from 5.3%. Closing this gap between what the nation saves and invests has left India leaning less heavily on fickle foreign capital.

Turning to supply, farming lost momentum, slowing to 2.4% from 4.2% as poor weather hit the monsoon (Kharif) harvest. A generous South-West monsoon offered relief, though, pushing reservoir levels to a record 91.4% by October 2025 and giving the winter and summer crops a boost. Come end-March 2026, the government’s grain reserves stood at over four times the legally required cushion.

Industry was a standout, growing 9.5% versus 8.7% the year before, with manufacturing surging 11.5% and factory utilisation climbing to 75.6% by the third quarter. The clean-energy push also hit milestones: renewable capacity passed 250 GW, total non-fossil capacity reached 283 GW — more than half (53.2%) of the power mix — fulfilling the COP26 pledge years ahead of 2030, while EV sales topped 25 lakh units under PM E-DRIVE. Services, contributing 69% of real growth, grew 8.7%, powered by trade, transport, hospitality, and professional finance and IT work.

Prices

A new price-measurement framework arrived in February 2026, when MoSPI rolled out a CPI series rebased to 2024, refreshing the basket using the 2023-24 household spending survey. Food and beverages saw their weight cut from 45.9% to 36.8%, ready meals were folded into restaurants and accommodation, a single housing-and-fuel category was carved out at 17.7%, and transport (8.8%) and information and communication (3.6%) were given their own slots.

Behind the headline numbers, food prices slipped 0.8% from April to December 2025. Tomatoes, onions, and potatoes plunged 31.3% as onion output jumped 26.7% and buffer stocks were released; pulses also fell, down 13%. Cutting the other way, edible oils and fats vaulted 15.0% on the back of global palm-oil biodiesel rules. Fuel inflation crept up to 2.4% over the same stretch after LPG cylinders rose ₹50 in April 2025 and another ₹60 in March 2026. Stripping out food and fuel, core inflation lingered near 4.3% (3.7% in the fourth quarter under the new series), kept warm by personal-care costs — chiefly gold and silver, which spiked as nervous investors sought shelter. Elsewhere, wholesale inflation softened to 0.7% from 2.3% on cheaper energy, and the GDP deflator fell to 0.9% from 2.5%.

Money and Credit

The RBI’s balance sheet equalled 26.4% of GDP. After accounting for the staggered one-percentage-point cut to the Cash Reserve Ratio — which brought the requirement down to 3.0% — reserve money grew 10.8%, while cash in public hands rose 11.4% on welfare payouts and stronger retail spending after tax cuts. Broad money expanded 13.0%, up from 9.4%, aided by a 10.6% rise in time deposits; the currency-to-deposit ratio dipped to 14.9% and the money multiplier firmed to 6.1.

Lending stayed robust. Non-food bank credit grew 15.9%, with non-bank credit up 13.3%. Loans to micro and small firms leapt 33.1% and to medium firms 21.7%; personal loans rose 16.2%, of which housing made up close to half; and bank lending to NBFCs climbed 26.3% once the RBI reset risk weights to normal in April 2025. Because credit outran deposits, the funding gap widened, nudging banks to issue more Certificates of Deposit to plug the hole.

Financial Markets

In the money market, the overnight call rate hugged the repo rate, sitting about 7 basis points beneath it, and collateral-backed trades dominated — triparty repos at 67% and market repos at 30%. Government bond yields dipped early on amid ample liquidity but firmed later, with the 10-year benchmark pushing past 7.04% by late March 2026 as crude prices and borrowing plans rose.

Equities had a rough year: the Sensex shed 7.1% to close at 71,948, as a strong first half gave way to a second-half slide driven by West Asian strains and a reset in tech valuations. Foreign portfolio investors offloaded a net ₹2.7 lakh crore of shares, while domestic institutions snapped up a net ₹8.5 lakh crore. The rupee leaned weaker all year, ending 9.9% lower at ₹94.83 to the dollar, and the trade-weighted NEER and REER measures fell 6.9% and 7.5%.

Government Finances

The Centre tightened its belt, trimming the fiscal deficit to 4.4% of GDP in 2025-26 (revised) on the strength of solid non-tax receipts and disciplined spending, with the bar set fractionally lower at 4.3% for 2026-27. Direct taxes are slated to reach 6.9% of GDP next year — a ten-year high — and central capital outlay is set to grow 11.5% to ₹12.2 lakh crore. States saw revenue growth ease on thinner central grants and softer GST, yet their combined deficit is budgeted at 3.0% of state GDP, with transfers from the Centre rising 12.2%.

The Sixteenth Finance Commission left the states’ slice of central taxes untouched at 41% but reworked the distribution formula, introducing a 10% weight for a state’s contribution to GDP, while paring income-distance to 42.5%, population to 17.5%, and fiscal performance to 10%. It also scrapped post-devolution revenue-deficit grants to stop rewarding weak revenue effort and to nudge states toward collecting more on their own.

The External Sector

The goods trade gap swelled to US$ 333.2 billion, but a 15.3% jump in net services exports and a 10.1% rise in remittances kept the current account deficit at a slim 1.0% of GDP through April–December 2025. Trade alliances shifted notably — China leapfrogged the US as India’s top single trading partner — and India sealed an FTA with the EU and signed deals with the UK (CETA), Oman (CEPA), and New Zealand (FTA). With inflows falling short of the external gap, reserves fell US$ 30.8 billion (excluding valuation), equity FPI flows reversed by US$ 16.5 billion, and gross FDI rose to US$ 94.5 billion (net US$ 7.7 billion). Reserves finished at US$ 691.1 billion in end-March 2026, covering 11 months of imports and 90.3% of external debt.

PART TWO: THE WORKINGS OF THE RESERVE BANK OF INDIA

Chapter III: Monetary Policy

The Monetary Policy Committee lowered the repo rate by a full percentage point to 5.25%, spread across a 0.25-point move in April 2025, a 0.50-point move in June 2025, and a 0.25-point move in December 2025. Its stance turned accommodative in April 2025 before reverting to neutral in June to preserve flexibility against jumpy fuel and commodity costs.

To keep cash flowing, the RBI added durable liquidity through open-market purchases, dollar-rupee swaps, and the one-point CRR cut, releasing roughly ₹2,50 crore into the system. After an internal review it retired its daily 14-day repo and reverse-repo auctions in favour of 7-day and fine-tuning operations, and the Standing Deposit Facility soaked up 84.9% of daily surplus parked with the central bank.

Rate cuts fed through reasonably well: banks shaved 0.60 point off their one-year median MCLR, fresh-loan rates fell 0.95 point and outstanding-loan rates 0.78 point. Loans tied to external benchmarks reached 65.4% of the total by December 2025, and because private banks carried a far larger share (89.2% against public banks’ 50.6%), cuts reached their borrowers faster.

Chapter IV: Credit Delivery and Financial Inclusion

Banks routed 45.0% of adjusted net credit to priority sectors, comfortably above the 40% floor, with Small Finance Banks topping the table at 78.8%. To ease pressure on small firms, the collateral-free lending ceiling for micro and small enterprises was doubled from ₹10 lakh to ₹20 lakh.

The Financial Inclusion Index rose to 67.0 in March 2025 from 64.2 on better usage and quality. The digital-payments drive achieved full digital onboarding in 710 districts (over 80% of the country), and basic savings accounts reached 7,304 lakh, 52% of them held by women. In December 2025 the RBI launched the 2025-30 financial-inclusion strategy, “Panch-Jyoti,” a 47-point plan resting on five pillars: widening access to affordable services for households and small firms; advancing women-led inclusion through gender-sensitive design; tying livelihoods and skills to formal finance; using financial education to instil discipline; and bolstering customer protection and grievance handling.

Chapter V: Financial Markets and Foreign Exchange

The RBI made the Unique Transaction Identifier mandatory for OTC derivative trades, consolidating the rule into a single master direction. It accepted municipal bonds as repo collateral, tied the FX-Retail platform to Bharat Connect, hooked NDS-OM up to global bond networks, and recognised FIMMDA as a self-regulatory organisation. To tame dollar-rupee swings it intervened across onshore and offshore currency-derivative markets and capped dealers’ net open rupee positions at US$ 100 million by April 2026.

On internationalising the rupee, the central bank finalised local-currency arrangements with the UAE, Indonesia, Maldives, and Mauritius, while banks in 35 countries opened Special Rupee Vostro Accounts. Rupee-settled exports touched ₹1,71,916 crore and imports ₹1,59,691 crore. Banks were cleared to lend rupees to counterparties in Nepal, Bhutan, and Sri Lanka, easing reliance on swap lines. Exporters got breathing room too — those serving Bharat Mart in the UAE were given nine months to repatriate earnings, the standard window for regular exports stretched from 9 to 15 months, and the external-borrowing framework was widened with limits keyed to a borrower’s finances.

Chapter VI: Regulation, Supervision and Stability

In a sweeping simplification, the Department of Regulation rolled more than 11,000 scattered circulars into 244 Master Directions spanning 30 categories and 11 types of regulated entities, and floated 64 draft directions for comment. The fintech arm layered programmability onto retail digital-rupee pilots to deliver food subsidies in Gujarat, Puducherry, and Chandigarh; built the Unified Markets Interface using wholesale CBDC to speed settlement, with a pilot to tokenise Certificates of Deposit; scaled up the Unified Lending Interface; and rolled MuleHunter.ai across banks to catch fraudulent mule accounts in near-real time. The RBI also studied the FREE-AI committee’s report on ethical AI, in step with the government’s launch of “Bharat Gen,” a state-backed multilingual, multimodal language model. On the supervisory front, a cyber-range initiative tested banks’ cyber defences, KYC/AML risk reviews covered NBFCs, and a supervisory data-quality index was built for smaller urban cooperative banks.

Chapter VII: Public Debt Management

The RBI raised ₹14.6 lakh crore in gross market borrowing for the Centre during 2025-26, with 2026-27 budgeted at ₹17.2 lakh crore gross and ₹11.7 lakh crore net (3.0% of GDP) — enough net borrowing to fund 69.2% of the central deficit. For states, it ran the securities programme and extended the 50-year interest-free capital-investment loan scheme, lifting the pool by a third to ₹2 lakh crore.

Chapter VIII: Currency Management

Cash in circulation grew 11.4% by value, up sharply from 5.8%, on spending after income-tax cuts, crop-damage compensation, and state cash transfers; the ₹500 note led in both value and count. Old notes were retired through shredding-and-briquetting and high-speed processing systems, printing costs were trimmed via efficiencies at BRBNMPL presses, coin reach was widened with more mobile vans, and the MANI app for visually impaired users was refreshed.

Chapter IX: Payments, Settlements and Technology

UPI volumes surged 30% past 200 billion transactions a year, and the digital-payments index rose 11%, reflecting steady uptake in rural and semi-urban areas. Under Payments Vision 2028 — themed “Shaping India’s Payment Frontier” and running through December 2028 — the RBI plans a full Digital Payments Intelligence Platform to combat cyber fraud, a central switch-on/switch-off tool for payment channels, and stronger consumer safeguards that cap customer liability for electronic fraud and compensate victims of low-value scams.

Chapter X: Communication, International Relations and Research

The central bank struck digital-asset partnerships with Singapore’s MAS and ran joint sessions with the UAE’s central bank to link fast-payment systems and trial cross-border CBDC flows, and it joined BIS Innovation Hub efforts including Project Rialto and the second phase of Project Mandala to smooth cross-border payments. Its statistical backbone, CIMS, was upgraded for micro-data analytics, sharpening forecasting and risk-tracking while lightening banks’ reporting load.

Chapter XI: Governance, Human Resources and Organisation

The RBI unveiled Utkarsh 2029, its 2026-29 strategy centred on earlier risk detection, deeper root-cause analysis, and more consistent supervisory action, and consolidated technical training under the Enterprise Computing and Cybersecurity Training Institute. It also pared back routine reporting for commercial bank boards so they can focus more on strategy and risk.

Chapter XII: The Reserve Bank’s Accounts for 2025-26

The balance sheet grew to 26.4% of GDP as of 31 March 2026, up from 23.7%, propelled by revaluation gains on foreign-currency assets and gold amid exchange-rate moves and rising bullion prices. Gold’s share of net foreign assets accordingly rose to 17.2% from 12.0%, and net income gains enabled a surplus transfer to the Centre to shore up stabilisation reserves.

Key Terms (Simple Explanations)

• GDP (Gross Domestic Product): Total value of all goods and services produced inside a country in a year. The headline measure of an economy’s size.
• CPI (Consumer Price Index): A measure of how prices of a basket of goods and services bought by households change over time. India’s official inflation target is based on CPI.
• WPI (Wholesale Price Index): A measure of how prices change at the wholesale (bulk) level, before goods reach consumers.
• GVA (Gross Value Added): The value an industry adds at each stage of production; GDP at factor cost is built up from GVA across sectors.
• GNDI (Gross National Disposable Income): A country’s total income (including transfers from abroad like remittances) that is available for spending and saving.
• GFCF (Gross Fixed Capital Formation): Investment in long-lived assets like factories, machinery, buildings, and infrastructure. A key sign of how much the economy is investing in its future.
• PFCE (Private Final Consumption Expenditure): Total spending by households on goods and services. It is the biggest component of demand in India.
• Repo Rate: The interest rate at which the RBI lends short-term money to commercial banks. The RBI’s main policy rate.
• CRR (Cash Reserve Ratio): The share of bank deposits that banks must keep as cash with the RBI. Lowering CRR releases more money for banks to lend.
• MPC (Monetary Policy Committee): A six-member committee of the RBI that decides the repo rate and the policy stance. Three members are from the RBI and three are external experts.
• MCLR (Marginal Cost of Funds-based Lending Rate): An internal benchmark used by banks to decide their lending rates, based on their own cost of funds.
• WALR (Weighted Average Lending Rate): The average interest rate that banks actually charge across all their loans, weighted by the size of each loan.
• EBLR (External Benchmark-based Lending Rate): A bank’s lending rate linked to an outside benchmark (usually the repo rate), so that changes in policy rate pass through to customers faster.
• LAF (Liquidity Adjustment Facility): The RBI’s main tool to manage short-term liquidity in the banking system, through repo (lending) and reverse repo (absorbing) operations.
• SDF (Standing Deposit Facility): A facility that lets banks park surplus cash with the RBI without giving collateral, at a rate slightly below the repo rate.
• OMO (Open Market Operations): When the RBI buys or sells government securities in the market to either inject or absorb rupee liquidity.
• VRR / VRRR (Variable Rate Repo / Reverse Repo): Auction-based operations through which the RBI provides or absorbs liquidity at market-determined rates.
• M3 (Broad Money): The widest measure of money supply, including currency with the public, demand deposits, time deposits, and other deposits with the RBI.
• Money Multiplier: The ratio of broad money (M3) to reserve money. It shows how many times the banking system multiplies central bank money.
• ANBC (Adjusted Net Bank Credit): The benchmark amount on which a bank’s Priority Sector Lending obligations are calculated.
• PSL (Priority Sector Lending): A requirement that banks lend a fixed share of their credit to specified priority sectors like agriculture, MSEs, education, housing for the weak, and weaker sections.
• CAD (Current Account Deficit): The gap between what a country pays out to the rest of the world (imports, dividends sent abroad) and what it earns (exports, remittances, services).
• GFD (Gross Fiscal Deficit): The total borrowing requirement of the government in a year, that is, the gap between what it spends and what it earns (excluding borrowings).
• BoP (Balance of Payments): The complete record of all economic transactions between a country and the rest of the world.
• FDI (Foreign Direct Investment): Long-term investment by foreign companies in a country’s businesses, often with management control.
• FPI (Foreign Portfolio Investment): Foreign investment in shares, bonds, and other financial instruments, without management control. More volatile than FDI.
• NEER / REER (Nominal / Real Effective Exchange Rate): NEER is the rupee’s value against a basket of foreign currencies; REER adjusts that for differences in inflation. Falls in these indicate a weaker rupee.
• G-sec (Government Securities): Bonds issued by the Central or State governments to borrow money from the market.
• 10-year yield: The market interest rate on the 10-year G-sec, a key benchmark for long-term borrowing in India.
• CBDC (Central Bank Digital Currency): A digital form of central bank money. India’s CBDC is called the e-rupee, with separate wholesale (CBDC-Wholesale) and retail (CBDC-Retail) versions.
• UPI (Unified Payments Interface): India’s real-time digital payments system that lets users transfer money instantly between bank accounts using a mobile app.
• ULI (Unified Lending Interface): A digital infrastructure built by the RBI to make small-ticket lending faster and friction-free by sharing borrower data with consent.
• SCB (Scheduled Commercial Bank): A bank included in the Second Schedule of the RBI Act, 1934. The main category of formal banks in India.
• SFB (Small Finance Bank): A specialised bank category created by the RBI to extend banking services to small businesses, marginal farmers, and the unbanked.
• NBFC (Non-Banking Financial Company): A financial company that lends and invests but cannot accept demand deposits like a bank.
• FCA (Foreign Currency Assets): The part of India’s reserves held in foreign currencies, mainly in US dollars, euros, yen, and pounds.
• NFA (Net Foreign Assets): A central bank’s total foreign assets minus its foreign liabilities, a key part of its balance sheet.
• HCES (Household Consumption Expenditure Survey): A large-scale national survey of how households spend their money, used to update CPI weights.
• CETA / CEPA / FTA: Different names for trade agreements. FTA is a Free Trade Agreement; CEPA is a Comprehensive Economic Partnership Agreement (broader, includes investment and services); CETA is a Comprehensive Economic and Trade Agreement.
• MoSPI: Ministry of Statistics and Programme Implementation, the central government body that produces India’s official statistics, including the CPI.
• IMF (International Monetary Fund): A 191-member international organisation that monitors the global economy, helps countries with balance of payments problems, and publishes forecasts like the World Economic Outlook.
• FC-XVI: The 16th Finance Commission, a constitutional body that decides how central taxes should be shared between the Centre and the States for a 5-year period.
• Master Directions: Consolidated, single-document regulations issued by the RBI on a specific topic, replacing many earlier scattered circulars.
• SRO (Self-Regulatory Organisation): A non-government organisation recognised by a regulator (like the RBI or SEBI) to set rules and supervise its own industry members.
• LCA (Local Currency Arrangement): A bilateral agreement between two central banks that allows trade between the two countries to be settled in their own currencies, reducing dependence on the US dollar.
• SRVA (Special Rupee Vostro Account): A rupee account opened by a foreign bank in an Indian bank, to settle trade in Indian rupees.
• LLM (Large Language Model): A type of artificial intelligence model trained on large amounts of text. Bharat Gen is India’s own state-backed multilingual, multimodal LLM.
• bps (basis points): A small unit of interest rate measurement. 100 bps = 1 percentage point. So a “100 bps cut” means an interest rate cut of 1 percentage point.

About the News (Q&A)

What is the overall picture from the RBI Annual Report 2025-26?

A fast-growing economy at 7.6 per cent, with sharp food deflation pulling CPI to 2.1 per cent, alongside a depreciating rupee, FPI outflows, falling Sensex, larger trade deficit cushioned by services and remittances, and an RBI that cut both the repo rate and CRR by 100 bps each while running a bigger balance sheet at 26.4 per cent of GDP.

What did the new CPI series change?

The base year moved from 2012 to 2024, with the Food and Beverages weight cut from 45.9 per cent to 36.8 per cent, a new unified Housing-water-electricity-gas-fuels division (17.7 per cent), and Transport and Information and Communication separated as distinct categories.

What are the headline monetary-policy actions?

A cumulative 100 bps repo rate cut to 5.25 per cent (in April, June, and December 2025), a 100 bps CRR cut to 3.0 per cent, and a stance briefly accommodative before returning to neutral.

Background Concepts (Q&A)

What is the “RBI Balance Sheet”, and Why is the 26.4 Per Cent of GDP Figure Significant?

The RBI’s balance sheet captures all its assets and liabilities as the central bank, monetary authority, banker to the government, and manager of foreign exchange reserves. The major assets are foreign currency assets, gold holdings, domestic investments (mainly government securities), and loans and advances to banks and the government. The major liabilities are currency in circulation, deposits from banks (including CRR balances), government deposits, and capital and reserves (including the Contingency Fund and the Currency and Gold Revaluation Account). When the balance sheet expands, it usually reflects larger forex operations, more open market activity, gold accumulation or revaluation gains, and higher currency issuance. The figure of 26.4 per cent of GDP is significant because it shows the balance sheet has grown faster than nominal GDP, signalling active liquidity management, forex intervention, and gold-driven revaluation gains. The Economic Capital Framework, based on the Bimal Jalan Committee (2019), governs how much risk buffer the RBI must hold within this balance sheet, with the Contingent Risk Buffer band of 5.5 to 6.5 per cent of the balance sheet.

What is “Priority Sector Lending (PSL)”, and Why are SFBs Required to Lend a Much Higher Share?

Priority Sector Lending (PSL) is a policy framework under which the RBI mandates that scheduled commercial banks, regional rural banks, small finance banks, and certain other regulated entities must lend a specified share of their Adjusted Net Bank Credit (ANBC) to sectors considered economically essential but credit-deprived. These sectors include agriculture, micro and small enterprises, education, housing for the weaker sections, renewable energy, social infrastructure, and weaker sections more broadly. The general PSL target for domestic commercial banks and foreign banks with 20 or more branches is 40 per cent of ANBC, with sub-targets of 18 per cent for agriculture (within which 10 per cent is for small and marginal farmers), 7.5 per cent for micro enterprises, and 12 per cent for weaker sections. Regional Rural Banks (RRBs) have a higher PSL target of 75 per cent, and Small Finance Banks (SFBs) have a target of 60 per cent of ANBC, reflecting their specialised mandate to serve the unbanked and underserved. Urban Cooperative Banks (UCBs) have a target of 60 per cent, and Foreign Banks with fewer than 20 branches have a target of 40 per cent. SFBs are structurally designed to be community-focused, small-ticket lenders, so a higher PSL target makes sense, and shows in their 78.8 per cent achievement, well above the 60 per cent norm. Banks that fall short must contribute the shortfall to specific funds like the Rural Infrastructure Development Fund (RIDF) with NABARD, the Small Industries Development Fund (SIDBI), or similar arrangements.

Practice MCQs

Q1. With reference to India’s macroeconomic performance in 2025-26 as per the RBI Annual Report, consider the following statements:

1. India’s real GDP grew at 7.6 per cent in 2025-26, up from 7.1 per cent in 2024-25.
2. Headline CPI inflation moderated sharply to 2.1 per cent in 2025-26 from 4.6 per cent in the previous fiscal year.
3. The Current Account Deficit (CAD) was contained at about 1.0 per cent of GDP during April-December 2025.
4. India’s real GDP growth for 2026-27 has been projected at 9.5 per cent in the RBI’s report.

How many of the above statements are correct?

(a) Only one (b) Only two (c) Only three (d) All four (e) None

(Statement 4 is wrong; the RBI has projected India’s GDP growth at 6.9 per cent for 2026-27, not 9.5 per cent.)

Q2. Consider the following statements about monetary policy actions of the RBI in 2025-26:

1. The MPC cut the policy repo rate cumulatively by 100 basis points to 5.25 per cent during the year.
2. The Cash Reserve Ratio (CRR) was cut by 100 bps to 3.0 per cent.
3. The MPC’s policy stance was shifted to accommodative in April 2025 but was returned to neutral in June 2025.
4. The Standing Deposit Facility (SDF) absorbed about 84.9 per cent of total daily Liquidity Adjustment Facility surplus.

Which of the above are correct?

(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four

Q3. With reference to the 16th Finance Commission, consider the following statements:

1. The vertical devolution share to states has been preserved at 41 per cent.
2. The horizontal criteria now include a 10 per cent weight for the States’ contribution to GDP.
3. The Income distance weight has been lowered to 42.5 per cent and population to 17.5 per cent.
4. The 16th Finance Commission has discontinued post-devolution revenue deficit grants.

Which of the above are correct?

(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four

Q4. Consider the following statements about Priority Sector Lending (PSL) in India:

1. The general PSL target for domestic commercial banks is 40 per cent of Adjusted Net Bank Credit (ANBC).
2. Regional Rural Banks (RRBs) have a higher PSL target of 75 per cent of ANBC.
3. Small Finance Banks (SFBs) have a PSL target of 60 per cent of ANBC.
4. Scheduled Commercial Banks in 2025-26 achieved a PSL ratio of 45.0 per cent of ANBC, exceeding the statutory threshold.

Which of the above are correct?

(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four

Answer Key

1. (c), Statements 1, 2, 3 are correct; Statement 4 is wrong because the RBI has projected 6.9 per cent GDP growth for 2026-27, not 9.5 per cent.
2. (e), All four statements are correct.
3. (e), All four statements are correct.
4. (e), All four statements are correct.

Exam Relevance

For Banking exams (RBI Grade B, SBI PO, IBPS PO and Clerk, NABARD Grade A, SIDBI Grade A), this is absolutely essential, especially RBI Grade B, where the Annual Report is a primary reference for the Economic and Social Issues and Finance and Management papers.
For SEBI Grade A and IRDAI Grade A, the report supports macroeconomic and regulatory awareness.