What is the Monetary Policy Committee (MPC)?

CalendarToday
timer
1 min read

Overview:

The Reserve Bank of India (RBI) recently announced that its rate-setting panel, the Monetary Policy Committee (MPC), will meet six times in the next financial year (FY24).

About Monetary Policy Committee (MPC):

  • The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016  to provide for a statutory and institutionalized framework for a MPC.
  • Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member MPC.
  • Function: The MPC is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. 
  • Composition:
    • MPC will have six members - the RBI Governor (Chairperson), the RBI Deputy Governor in charge of monetary policy, one official nominated by the RBI Board, and the remaining three members would represent the Government of India.
    • The external members hold office for a period of four years.
  • The quorum for a meeting shall be four Members, at least one of whom shall be the Governor and, in his absence, the Deputy Governor, who is the Member of the MPC.
  • The MPC takes decisions based on a majority vote. In case of a tie, the RBI governor will have the second or casting vote.
  • The decision of the MPC would be binding on the RBI.

 


Q1) What is Monetary Policy?

Monetary policy is a set of tools used by a nation's central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements.

Source: RBI releases Monetary Policy Committee schedule for FY24