Monetary policy committee voted unanimously to raise the repo rate to 4.9%

MONETARY Policy Committee (MPC)

Why in the news?

The RBI’s six-member monetary policy committee voted unanimously

To raise the repo rate to 4.9% in a bid tame inflation.

About Monetary Policy Committee (MPC)

  1. Monetary policy refers to the policy of the central bank with regard to the use of monetary

Instruments under its control to achieve the goals specified in the RBI Act.

  • The primary objective of the RBI’s monetary is to maintain price stability while keeping in maid the objective of growth.
  • In may 2016, the RBI Act was amended to provide a legislative mandate to the central bank to operate the country’s monetary policy framework.
  • This amendment 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.

The Committee

  1. Under Section 45Zb of the amended RBI Act 1934, the central government is empowered to constitute a six-member monetary Policy Committee (MPC).
  2. MPC will determine the policy interest rate required to achieve the inflation target.
  3. The first such MPC was constituted on September 29,2016.

Member of MPC

As per the amended RBI act, the MPC shall consist of

  1. The RBI governor as its ex officio chairperson,
  2. The Deputy governor in charge of monetary policy,
  3. An officer of the bank to be nominated by the central board, and
  4. 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.  
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