Context: The government has set up a panel headed by the department of economic affairs (DEA) secretary Tarun Bajaj to select four new members for the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC).
More on the news:
- This comes after the central government refused an RBI request to extend till 31 March 2021 the tenure of three MPC members whose terms end on 30 September 2020.
- The request was made in June 2020 keeping the COVID-19 situation in mind since the central bank is stretched for resources because of work from home.
- All three outgoing members are external representatives, who are appointed by the government for a fixed term of four years.
- The rules do not allow for reappointment and hence a search committee has been set up. It also includes current RBI governor Das.
About Monetary Policy Committee (MPC)
It is a committee of the Reserve Bank of India which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation targets at 4% (with a standard deviation of 2%)
Monetary Policy Committee is defined in the Reserve Bank of India Act, 1934, and is constituted under Sub-section (1) of Section 45ZB of the same Act.
Composition of MPC
The Central Government constitutes the MPC through a notification in the Official Gazette.
MPC has six members, -
- The RBI Governor (Chairperson),
- The RBI Deputy Governor in charge of monetary policy,
- One official nominated by the RBI Board and
- The remaining three members would represent the Government of India.
The proceedings of MPC are confidential and the quorum for a meeting shall be four members, at least one of whom shall be the Governor and in his absence, the Deputy Governor who is the Member of the MPC.
The MPC makes decisions based on majority vote (by those who are present and voting).
In case of a tie, the RBI governor will have the second or casting vote.
The decision of the Committee would be binding on the RBI.