MONETARY POLICY COMMITTEE (MPC)

About:

• Background:
  • The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC.
    
    
  • Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee (MPC) to determine the policy interest rate required to achieve the inflation target.
    
    
  • The first such MPC was constituted on September 29, 2016.
    
    
  
  
  
• Functions: Section 45ZB lays down that “the Monetary Policy Committee shall determine the Policy Rate required to achieve the inflation target”, and that “the decision of the Monetary Policy Committee shall be binding on the Bank”.
  
  
• Members:
  • Section 45ZB says the MPC shall consist of the RBI Governor as its ex officio chairperson, the Deputy Governor in charge of monetary policy, an officer of the Bank to be nominated by the Central Board, and three persons to be appointed by the central government.
    
    
  • The last category of appointments 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”(Section 45ZC).