Monetary Policy Committee (MPC)

The six-member Monetary Policy Committee (MPC) will kick off three-day monetary policy meet.

https://economictimes.indiatimes.com/markets/stocks/news/rbi-monetary-policy-key-things-to-know/articleshow/73910451.cms?from=mdr

Monetary Policy Committee (MPC):

• The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016,  to provide for a statutory and institutionalised framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth.
• The Monetary Policy Committee 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.

Composition:

• Altogether, the MPC will have six members
  • The RBI Governor (Chairperson)
  • The RBI Deputy Governor in charge of monetary policy
  • One official nominated by the RBI Board
  • Three members representing the Government of India
• The Members of the Monetary Policy Committee appointed by the Central Government shall hold office for a period of four years, with immediate effect or until further orders, whichever is earlier.
• The meetings of the Monetary Policy Committee shall be held at least 4 times a year and it shall publish its decisions after each such meeting.

What is RBI Monetary Policy?

• Monetary policy is the macroeconomic policy laid down by the Reserve Bank of India. It involves the management of money supply and interest rates.
• The central bank tweaks interest rates to achieve macroeconomic objectives such as liquidity, consumption and inflation.

What is the objective of Monetary Policy Committee?

• The objective of the Monetary Policy Committee is to fix the benchmark interest rate i.e repo rate.

What are repo rate and reverse repo rate?

• Repo rate is the rate at which RBI lends money to the commercial banks. The rate is used by monetary authorities to control inflation.
• On the other hand, reverse repo is the rate at which commercial banks park their money with the central bank.
• At present, repo rate and reverse repo rate stand at 5.15 per cent and 4.90 per cent, respectively.