RBI’S MPC: UPSC Daily Important Topic | 11 June 2022

RBI’S MPC

The RBI has a government constituted Monetary Policy Committee (MPC) which is tasked with framing monetary policy using tools like the repo rate, reverse repo rate, bank rate, cash reserve ratio (CRR).

It has been instituted by the Central Government of India under Section 45ZB of the RBI Act that was amended in 1934.

 □ FUNCTIONS

The MPC is entrusted with the responsibility of deciding the different policy rates including MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility.

 □ COMPOSITION OF MPC

◇ The committee will have six members. Of the six members, the government will nominate three. No government official will be nominated to the MPC.

◇ The other three members would be from the RBI with the governor being the ex-officio chairperson.

◇ Deputy governor of RBI in charge of the monetary policy will be a member, as also an executive director of the central bank.

 □ SELECTION AND TERM OF MEMBERS

◇ Selection: The government nominees to the MPC will be selected by a Search-cum-Selection Committee under Cabinet Secretary with RBI Governor and Economic Affairs Secretary and three experts in the field of economics or banking or finance or monetary policy as its members.

◇ Term: Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.