Answer writing practice — 31 October 2026

Monetary policy transmission in India operates through the interest rate channel, where changes in the Repo Rate influence bank lending rates. Recently, a divergence emerged: while the RBI raised the Repo Rate to 5.50% in October 2026, the Weighted Average Lending Rate (WALR) on fresh loans fell to 8.51% in September. This gap highlights the lag and friction in policy transmission. Several factors drive this divergence. First, banks often maintain a spread over the benchmark to cover operational costs and credit risk, which does not adjust instantaneously with policy shifts. Second, the Marginal Cost of Funds plus a fixed margin (MCLR) mechanism, currently at a median of 8.55%, reflects a lagged adjustment to funding costs rather than immediate parity with the Repo Rate. Third, competitive pressures in the banking sector may lead institutions to hold lending rates steady or lower them to attract borrowers, despite tighter monetary conditions. This disconnect can weaken the effectiveness of monetary policy in controlling inflation or stimulating growth. To enhance transmission, the RBI must continue to monitor bank spreads and encourage greater transparency in pricing. Additionally, promoting competition among banks and ensuring efficient funding markets will help align lending rates more closely with policy rates, thereby improving the overall efficacy of monetary management.

Model answer written by AI and checked by a second AI pass against the news item on 31 October 2026. It is one way to answer, not an official answer — no person has reviewed it.

Rakesh Kumar Village Rampur, Post Salempur District Sitapur, Uttar Pradesh 5 November 2026 The District Collector District Collectorate Sitapur, Uttar Pradesh Subject: Request for support to the Gram Panchayat under the Pradhan Mantri Viksit Gram Swaraj Yojana Respected Sir, I am a resident of Rampur village and write with reference to the Pradhan Mantri Viksit Gram Swaraj Yojana, which the Union Cabinet approved on 28 October 2026 as a Centrally Sponsored Scheme for 2026-27 to 2030-31 to strengthen Panchayati Raj institutions. I request you to arrange training for our Gram Panchayat members and officials so that they can plan and execute works effectively. I also urge that details of funds received and projects undertaken be displayed publicly and discussed in the Gram Sabha to ensure transparency. Timely release and proper utilisation of funds will help our village improve local services. I shall be grateful for your kind attention to this matter. Yours faithfully, Rakesh Kumar

Model answer written by AI and checked by a second AI pass against the news item on 31 October 2026. It is one way to answer, not an official answer — no person has reviewed it.