Answer writing practice — 2 November 2026

The proposed privatisation of IDBI Bank has triggered nationwide protests, highlighting the tension between fiscal consolidation and social stability. Proponents argue that disinvestment enhances operational efficiency, attracts foreign capital, and reduces the fiscal burden on the government, thereby strengthening the banking sector’s resilience. Conversely, critics contend that privatisation may lead to job losses, reduced credit flow to priority sectors like agriculture and MSMEs, and increased inequality, as private entities prioritize profit over social welfare. The employee hunger strike underscores the fear of job insecurity and the loss of the social contract inherent in public banking. While market discipline can improve governance, it must not compromise financial inclusion goals. A balanced approach is essential, where privatisation is accompanied by robust regulatory oversight and safeguards for employees and vulnerable borrowers. The government should ensure that disinvestment does not undermine the developmental role of banks, maintaining a hybrid model that leverages private efficiency while preserving public interest in credit accessibility and economic stability.

Model answer written by AI and checked by a second AI pass against the news item on 2 November 2026. It is one way to answer, not an official answer — no person has reviewed it.

The Reserve Bank of India (RBI) has recently marked a significant turning point in its monetary policy trajectory. In its October 2026 meeting, the Monetary Policy Committee (MPC) unanimously decided to raise the repo rate by 25 basis points to 5.50%. This move represents the first rate hike since February 2023, signaling a decisive shift from a neutral stance to one of calibrated tightening. The decision was accompanied by an increase in the Standing Deposit Facility (SDF) rate to 5.25% and the Marginal Standing Facility (MSF) rate to 5.75%, effectively narrowing the liquidity window and tightening the overall credit environment. The primary driver behind this policy shift is the need to manage inflationary pressures. The RBI projects CPI inflation for FY27 to reach 5.2%, a level that threatens to erode purchasing power and destabilize the economy. By raising interest rates, the central bank aims to curb excessive demand and stabilize prices. However, this tightening comes with trade-offs. While the RBI remains optimistic about economic momentum, projecting GDP growth at 7.1% for FY27, higher borrowing costs may slow down investment and consumption. Banks will likely pass on these higher rates to borrowers, potentially impacting sectors sensitive to credit costs. This calibrated approach reflects the RBI’s commitment to maintaining price stability without stifling growth. The next MPC decision, scheduled for 4 December 2026, will be crucial in assessing the effectiveness of these measures. For the banking sector, this period demands careful balance, ensuring that credit flows remain accessible for productive purposes while adhering to the central bank’s tighter framework. Ultimately, the success of this policy will depend on how well the economy absorbs the higher rates while sustaining its robust growth trajectory.

Model answer written by AI and checked by a second AI pass against the news item on 2 November 2026. It is one way to answer, not an official answer — no person has reviewed it.