Context:
Government notifies reconstitution of Monetary Policy Committee (MPC) under the Reserve Bank of India Act, 1934.
Monetary Policy Committee (MPC):
- Statutory body under Reserve Bank of India Act 1934.
- Recommended by – Urjit Patel Committee.
- 1st such MPC was constituted in 2016.
- Objective – Maintain price stability while keeping growth in mind.
- Functions – MPC shall determine the Policy Rate required to achieve the inflation target
- Decision of the Monetary Policy Committee shall be binding on the Bank
- Composition – 6 members (including the Chairman)
- Chaired by – RBI Governor.
- Other members –
- Deputy Governor in charge of monetary policy
- An officer of the Bank to be nominated by the Central Board
- 3 persons to be appointed by the central government
- They must be from “persons of ability, integrity and standing, having knowledge and experience in the field of economics or banking or finance or monetary policy”
- Decision making – Each member of the MPC has 1 vote, and in the event of an equality of votes, the Governor has a second or casting vote.
- Meeting – At least 4 times a year with a quorum of 4 members.
- Publish report in every 6 months.
Source: PIB
Previous Year Question
Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?
1. It decides the RBI’s benchmark interest rates
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below:
[UPSC Civil Services Exam – 2017 Prelims]
(a) 1 only
(b) 1 and 2 only
(c) 3 only
(d) 2 and 3 only
Answer: (a)
Explanation:
Statements 2 and 3 are incorrect. MPC is a 6-member body. It functions under the chairmanship of the RBI Governor.
