The Monetary Policy Committee is primarily responsible for fixing the benchmark interest rate in India. It was set up in 2015 after amending the RBI act. Before that, the government and RBI made an agreement through which the government tasked RBI with the responsibility of price stability and inflation targeting. The monetary policy framework was signed on February 20, 2015. This committee is tasked with framing monetary policy using tools like the repo rate, reverse repo rate, cash reserve ratio.
Role of the Monetary Policy Committee-
The Monetary Policy Committee has a significant share of responsibility when it comes to the economic evaluation of the country. The committee aims to serve the steady economic growth of the country. The committee is also a representative of equity and social justice and is not allowed to promote any kind of double standard policy. MPC conducts meetings at least 4 times a year and the monetary policy is published after every meeting with each member explaining their opinions. The monetary policy is the process of regulating the supply of money in an economy by the monetary authority of the country.
The committee decides what monetary policy action to take. They set and announce policy eight times a year. The MPC has nine individual members. Before they decide what action to take, they hold several meetings to look at how the economy is working.
Composition of the committee-
The Monetary Policy Committee is comprised of six members- three officials of the reserve bank of India and three external members nominated by the government of India. The governor of the Reserve bank of India is the chairperson of the committee.
The major decisions are taken by the governor having the casting vote in case of a tie. Currently Shaktikanta Das, Governor of the Reserve Bank of India is the chairperson of the committee.
According to the RBI Act, external members of the MPC will be appointed by the central government “from amongst persons of ability, integrity, and standing, having knowledge and experience in the field of economics or banking or finance or monetary policy”.
CONCLUSION- So, in this article, we discussed the composition and the Role of the Monetary Policy Committee. Undoubtedly, this committee is responsible for achieving the ultimate economic goals of the nation annually. The monetary policy also funds for the central government. It is the determining factor of the economic wellbeing of the nation and also a highly qualified board of members to do so. Hopefully, this note helped you to understand the role and composition of the Monetary Committee.