Brace yourselves for a new Monetary Policy Committee

The finance bill, bill, which was recently passed in the Lok Sabha is awaiting passage in Rajya Sabha. The government has decided to set up a six member Monetary Policy Committee (MPC) after the passage of Finance Bill, 2016. This committee will comprise of three independent directors and three members nominated by the government. This committee will be responsible for fixing benchmark interest rates of the Reserve Bank of India (RBI) and look into inflation targets.

The three members from the Reserve Bank will be the RBI Governor, Deputy Governor and Executive Director. The three others who will be nominated form the Government’s side will be via selection and voting. This move has been taken to distribute the powers of decision making with respect to setting up interest rates. Currently this power solely lies with the RBI Governor. However, a collective decision among a group of competent academics will ensure optimal growth and will leave little margin for error.

The members of the MPC will continue for a tenure of four years and will not be eligible for reappointment. The committee is expected to meet at least four times a year, some times more if deemed necessary. When this is established, the RBI will be responsible for publishing the Monetary Policy Report every six months.  For More details please visit our website at http://www.ca-msa.com