MONETARY POLICY AND MONETARY POLICY COMMITTEE (MPC)

 RBI uses monetary policy to control inflation, interest rates,supply of money and credit
availability.
 The RBI has a government-constituted Monetary Policy Committee (MPC) which is tasked with
framing monetary policy using tools like the repo rate, reverse repo rate, bank rate, cash reserve
ratio (CRR).
Composition of MPC:
 The committee will have six members. Of the six members, the government will nominate three.
No government official will be nominated to the MPC.
 The other three members would be from the RBI with the governor being the ex-officio
chairperson. Deputy Governor of RBI in charge of the monetary policy will be a member, as also
an executive director of the central bank.
Decision: Decisions will be taken by majority vote with each member having a vote.
RBI governor’s role: The RBI Governor will chair the committee.The governor, however, will not enjoy
a veto power to overrule the other panel members, but will have a casting vote in case of a tie.
Selection: The government nominees to the MPC will be selected by a Search-cum-Selection Committee
under Cabinet Secretary with RBI Governor and Economic Affairs Secretary and
three experts in the field of economics or banking or finance or monetary policy as its members.
Term: Members of the MPC will be appointed for a period of four years and shall not be eligible for
reappointment.