Banking Awareness Question Day 16

Banking Awareness Question Day 16: Monetary Policy Committee of India

The Monetary Policy Committee is responsible for fixing the benchmark interest rate in India. The meetings of the Monetary Policy Committee are held at least 4 times a year (specifically, at least once every quarter) and it publishes its decisions after each such meeting.

The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India. They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”. The Governor of the Reserve Bank of India is the chairperson ex officio of the committee. Decisions are taken by the majority with the Governor having the casting vote in case of a tie. The current mandate of the committee is to maintain 4% annual inflation until 31st March 2021 with an upper tolerance of 6% and a lower tolerance of 2%.

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  • The Monetary Policy Committee of India is a committee of the Reserve Bank of India that is responsible for fixing the benchmark interest rate in India. The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
  • The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
  • They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.
  • The Governor of the Reserve Bank of India is the chairperson ex officio of the committee. Decisions are taken by majority with the Governor having the casting vote in case of a tie.
  • The current mandate of the committee is to maintain 4% annual inflation until March 31, 2021 with an upper tolerance of 6% and a lower tolerance of 2%.
  • The committee was created in 2016 to bring transparency and accountability in fixing India’s Monetary Policy.
  • The monetary policy are published after every meeting with each member explaining his opinions.
  • The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.

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The composition of the current and first monetary policy committee is as follows:
1. Governor of the Reserve Bank of India – Chairperson, ex officio –  Urjit Patel
2. Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio- Viral V Acharya
3. One officer of the Reserve Bank of India to be nominated by the Central Board– Member, ex officio; – Michael Patra
4. Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI) – Member;
5. Professor Pami Dua, Director, Delhi School of Economics – Member;
6. Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad – Member
Members referred to at 4 to 6 above, will hold office for a period of four years from the date of appointment while the other three members are official.