Published on: November 5, 2022

Monetary Policy Committee (MPC)

Monetary Policy Committee (MPC) Why in news?

Chambly The Reserve Bank’s Monetary Policy Committee (MPC) held a meeting to ‘discuss and draft the report to be sent to the government’ for missing the 2%-6% inflation target mandated by the MPC framework.

Monetary Policy Committee

  • It is responsible for fixing the benchmark interest rate in India.
  • The meetings of the Monetary Policy Committee are held at least four times a year (specifically, at least once a quarter) and it publishes its decisions after each such meeting.
  • Members : comprises six membersthree officials of the Reserve Bank of India and three external members nominated by the government of India.
  • Chairperson: The governor of the Reserve Bank of India is the chairperson ex officio of the committee.
  • Decision and Inflation targeting : 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 31 March 2026 with an upper tolerance of 6% and a lower tolerance of 2%
  • Establishment: The Reserve Bank of India Act, 1934, was amended by Finance Act (India), 2016, to constitute MPC which will bring more transparency and accountability in fixing India’s monetary policy
  • The committee is answerable to the government of India if the inflation exceeds the range prescribed for three consecutive quarters.