**Executive Summary**
This document is the answer provided by the Minister of State in the Ministry of Finance to the Lok Sabha Unstarred Question No. 167, dated December 1, 2025, regarding the inflation level in the country, steps taken by the government in different sectors and merger proposal of public sector banks. The answer covers current inflation levels, measures to control inflation, technological advancements in banking, the status of the credit rating framework for farmers, and any plans for public sector bank mergers. A key date is August 13, 2025 when the RBI's committee outlined guidelines for AI enablement in the financial sector.
**Key Points / Main Content**
* **Inflation Levels:**
* The average retail inflation, measured by the Consumer Price Index, has decreased from 5.4% in 2023-24 to 4.6% in 2024-25 and further to 1.9% in 2025-26 (April – October).
* RBI estimates annual retail inflation for 2025-26 at 2.6%, within its target band.
* **Government Measures to Control Inflation:**
* The Monetary Policy Committee (MPC) has reduced the policy rate by 100 basis points cumulatively since February 2025.
* Series of administrative measures, including fiscal and trade policy, to control inflation, such as augmenting buffer stocks, strategic sales of procured grains, facilitation of imports and export curbs, implementation of stock limits, subsidized retail sales under the Bharat brand, market intervention for perishable commodities, increasing scientific storage capacity and rationalizing GST rates.
* Increasing disposable income by exempting annual incomes up to ₹12 lakh from income tax.
* **Technology in Banking:**
* RBI's Regulatory Sandbox (RS) framework enables testing of innovative solutions based on blockchain, AI/ML, mobile applications, data analytics, and API-driven services.
* Five cohorts completed under themes like retail payments, cross-border payments, MSME lending, and fraud prevention.
* Committee report on Responsible and Ethical Enablement of AI (FREE-AI) outlined guidelines on August 13, 2025, to help the sector leverage AI responsibly.
* **Credit Rating Framework for Farmers:**
* The Union Budget 2025-26 announced the development of a Grameen Credit Score (GCS) framework.
* Four Credit Information Companies have designed proprietary scoring models.
* Public Sector Banks (PSBs) and other regulated entities are testing these models for accuracy and technical robustness.
* **Merger of Public Sector Banks:**
* No proposal for the merger of public sector banks is currently under consideration.
**Impact Analysis**
**Impact: Common Citizens**
* Affected by inflation levels and measures taken to control them.
**Action Required**
* Benefit from measures aimed at controlling inflation, such as subsidized sales and increased disposable income through tax exemptions.
**Impact: Indian Banking Sector**
* Affected by the RBI's initiatives to leverage technology through the Regulatory Sandbox.
**Action Required**
* Public Sector Banks (PSBs) and other regulated entities should test the Grameen Credit Score (GCS) models and implement AI responsibly while managing risks.
**Impact: Farmers and Rural Borrowers**
* Affected by the development of the Grameen Credit Score (GCS) framework.
**Action Required**
* Access credit through the Grameen Credit Score (GCS) framework.
Key Entities Referenced
Reserve Bank of India: India's central bank, responsible for maintaining inflation within a targeted framework.
Monetary Policy Committee (MPC): A committee responsible for setting India's monetary policy, including interest rates, to manage inflation and support economic growth.
Union Budget 2025-26: The annual financial statement of India, referenced in the context of a credit rating framework for farmers (Grameen Credit Score).
Goods and Services Tax (GST): An indirect tax in India, mentioned in the context of rationalization to boost consumption demand.
Regulatory Sandbox (RS): A framework by the RBI to test innovative financial products and solutions.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 167
TO BE ANSWERED ON 01.12.2025/ Agrahayana 10, 1947 (Saka)
INFLATION LEVEL IN COUNTRY
167. Dr. K SUDHAKAR:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government has data regarding the prevailing inflation levels in the country, if so, the
details thereof;
(b) the details of the steps taken by the Government to ensure that inflation remains under the
targeted framework by the Reserve Bank of India;
(c) the details of the steps taken by the Government to leverage technology progress in the
Indian banking sector including usage of block chains for financial transactions;
(d) the details and the status of credit rating framework proposed for farmers in the Union
Budget 2025-26; and
(e) whether the Government is planning further merger and consolidation of public sector
banks in the country, if so, the details thereof and the reasons therefor?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) and (b): The average retail inflation measured by the Consumer Price Index declined from 5.4 per cent in
2023-24 to 4.6 per cent in 2024-25 and further to 1.9 per cent in 2025-26 (April – October). Though the
prevailing retail inflation of 1.9 per cent is marginally below the lower bound of 2 per cent of the Reserve
Bank of India’s (RBI) inflation target band (4 per cent with a tolerance band of ±2 percentage points), the
RBI estimates the annual retail inflation for 2025-26 as 2.6 per cent, which is well within its inflation
target band. In order to align inflation within its target band along with supporting the economic growth,
the Monetary Policy Committee (MPC) has reduced the policy rate by 100 basis points cumulatively since
February 2025. The Government of India has also undertaken a series of administrative measures,
including fiscal and trade policy, to control inflation and mitigate its impact on the common citizen. These
include, inter alia, augmentation of buffer stocks for essential food items, strategic sales of procured grains
in the open market, facilitation of imports and export curbs during periods of short supply, implementation
of stock limits to push more supplies of select commodities into the market, retail sales of select food
items under the Bharat brand at subsidised rates, market intervention for perishable horticultural and
agricultural commodities, creation of scientific storage capacity and above all, increasing the disposable
income of individuals by exempting annual incomes up to ₹12 lakh (and ₹12.75 lakh for salaried
individuals with standard deduction) from income tax and boosting consumption demand through the
recent rationalization of Good and Services Tax (GST) rates.(c): To leverage technological progress in the Indian banking sector, the RBI, through its Regulatory
Sandbox (RS) framework, has enabled the testing of innovative products and solutions based on
emerging technologies such as blockchain, Artificial Intelligence/ Machine Learning (AI/ML), mobile-
based applications, data analytics and Application Programming Interface (API)-driven services. Five
cohorts have already been completed under themes such as retail payments, cross-border payments,
Micro Small and Medium Enterprises (MSME) lending, prevention and mitigation of financial frauds,
and a theme-neutral cohort. Further, the Committee, constituted by the RBI, to develop a Framework for
Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector, in its
report on August 13, 2025, outlined guidelines to help the sector leverage AI responsibly while managing
associated risks.
(d): In the Union Budget 2025-26, the Hon’ble Finance Minister announced the development of a
Grameen Credit Score (GCS) framework to address the credit needs of Self-Help Group members and
other rural borrowers. All four Credit Information Companies have designed proprietary scoring models,
which are currently being tested by Public Sector Banks (PSBs) and other regulated entities to assess
their accuracy and technical robustness.
(e): No proposal on merger of public sector banks is currently under consideration.
****