The government on Thursday notified the six-member Monetary Policy Committee (MPC), paving the way for it to decide key interest rates from the October 4 policy meeting onwards. Additionally, Reserve Bank of India Governor Urjit Patel also met Finance Minister Arun Jaitley in New Delhi ahead of the policy meeting.
The MPC has been tasked with deciding benchmark interest rates, something which the RBI governor used to decide till now.
“As per the provisions of the RBI Act, out of the six members, three members will be from the RBI and the other three members of MPC will be appointed by the central government,” the finance ministry said in a statement on Thursday.
“The central government has accordingly constituted, through a gazette notification dated 29th Sept 2016, the Monetary Policy Committee of RBI,” it said.
The three RBI members of the MPC are Patel, Deputy Governor R Gandhi, and Executive Director Michael Patra. The central government’s nominees to the MPC are Chetan Ghate, an Indian Statistical Institute professor; Pami Dua, who teaches at the Delhi School of Economics; and Ravindra Dholakia, a professor at Indian Institute of Management-Ahmedabad.
The central government appointees to the MPC shall hold their posts for a period of four years. The MPC “would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. A committee-based approach for determining the monetary policy will add lot of value and transparency to monetary policy decisions,” the finance ministry said.
The meetings of the MPC will be held at least four times a year and it will publish its decisions after each such meeting.
The inflation target for the MPC and RBI to meet, of 4 per cent (+/-2 per cent) had already been notified by the government earlier. The target stands till March 31, 2021.
