New external MPC members to be announced by Sept 28; extension ruled out

After exploring the possibilities, a decision has been taken to appoint a fresh team of external members, a senior finance ministry official said

The Centre has shelved the idea of giving a short extension to the three external members in the rate-setting monetary policy committee (MPC) of the Reserve Bank of India (RBI).

After exploring the possibilities, a decision has been taken to appoint a fresh team of external members, a senior finance ministry official told Business Standard.

Names of the new members are likely to be announced by September 28.

The next policy deliberations are scheduled for September 29 to October 1, and the MPC will have to on-board new members before that.

According to finance ministry sources, the search committee, which initiated the appointment process in July-August, had shortlisted five to six candidates. A decision on the final names was taken last weekend, following lengthy discussions with the search committee and the RBI.

The RBI had sought an extension of the external panel until March 2021 due to the Covid-19 pandemic. “A short extension was contemplated, but then we would have had to go through the process all over again in another six months. Besides, conflict of interest also arises as one of the members of the MPC is also part of a committee that assesses the moratorium impact on interest payment to borrowers,” said another source privy to the discussion.

The term of Indian Statistical Institute Professor Chetan Ghate, Delhi School of Economics Director Pami Dua, and Ravindra H Dholakia of the Indian Institute of Management-Ahmedabad is due to end on Monday (September 21). However, their role was technically over after the August 4-6 monetary policy meet. All three were appointed to the MPC in 2016, with a mandate to target consumer prices within the range of 2-6 per cent.

The other three on the panel are from the RBI as ex-officio members. Governor Shaktikanta Das heads the MPC, while Deputy Governor Michael Patra and Executive Director Mridul K Saggar are the other two.

Since February 2019, the MPC has cut policy rates by 250 basis points in phases, while deciding to pause in the August 4-6 policy review to keep the powder dry.

The RBI Act states that the external members of the MPC shall hold office for a period of four years and shall not be eligible for reappointment. Decisions in the MPC are taken by a majority vote, with members having a vote each. However, if there is a tie, the RBI governor can cast an extra vote to decide on the outcome.

Typically, the MPC meets six times a year, but in 2019-20, it had an additional meeting in March-end to assess the current and evolving macroeconomic situation during the Covid-19 pandemic.

        MPC new panel

• External members’ appointment process concluded
• During the process, search committee shortlisted six names
• Of that, three names have been finalised by the government
• New members likely to be part of policy deliberation starting September 29