Economics • Banking & FinanceHard
What is the primary mandate and composition of the Monetary Policy Committee established under the Reserve Bank of India Act, 1934?
A. A six-member body responsible for determining the benchmark policy interest rate required to achieve the inflation target set by the central government.✓ Correct Answer
B. A twelve-member committee appointed by the Ministry of Finance to audit commercial bank non-performing assets annually.
C. An advisory council comprising state finance ministers tasked with recommending agricultural loan waivers.
D. A regulatory board overseeing foreign institutional investments in Indian stock exchanges.
💡 Solution & Explanation
The Monetary Policy Committee is a statutory six-member body constituted under Section 45ZB of the Reserve Bank of India Act, 1934, comprising three officials from the central bank and three external members appointed by the central government. It determines the policy repo rate required to maintain price stability while keeping in mind the objective of growth, operating under a flexible inflation targeting framework of four percent with a tolerance band of plus or minus two percent. Decisions are taken by majority vote, with the RBI Governor holding a casting vote in the event of a tie. Transparency is mandated through the publication of meeting minutes.
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