Monetary Policy Committee (MPC)

The Monetary Policy Committee (MPC) has been constituted by central government in September 2016 for maintaining price stability, while keeping in mind the objective of growth.

Members of MPC

The committee consists of six members of which three Members are from the RBI and the other three Members of MPC are appointed by the Central Government:

  • The Governor of the Bank—Chairperson, ex officio
  • Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio;
  • One officer of the Bank to be nominated by the Central Board—Member, ex officio;
  • Three members to be nominated by Central government

The Members of the Monetary Policy Committee appointed by the Central Government shall hold office for a period of four years

The Central Government in September 2016 nominated the members as under:

  • Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI)
  • Professor Pami Dua, Director, Delhi School of Economics
  • Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad

Inflation Targeting

The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016 to provide a statutory basis for the implementation of the flexible inflation targeting framework. The task of the committee is to fix the benchmark policy rate (repo rate) required to contain inflation within the specified target level.

  • The inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years.
  • The Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.

Meetings of MPC

The meetings of the Monetary Policy Committee shall be held at least 4 times a year and it shall publish its decisions after each such meeting.

  • The quorum for the meeting of the MPC is four members
  • Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.

Statutory Mandate

Section 45ZB of the amended RBI Act, 1934 also provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government by notification in the Official Gazette