Economics • Banking & FinanceMedium
What is the institutional composition and primary mandate of the Monetary Policy Committee established under the Reserve Bank of India Act, 1934?
A. A six-member body responsible for determining the policy interest rate required to achieve the inflation target✓ Correct Answer
B. A twelve-member committee appointed by the Ministry of Commerce to fix minimum support prices for agricultural commodities
C. An advisory panel of commercial bank executives tasked with reviewing non-performing asset recovery rates
D. A regulatory board overseeing foreign exchange reserve allocation across international sovereign bonds
💡 Solution & Explanation
Section 45ZB of the amended Reserve Bank of India Act provides for a six-member Monetary Policy Committee comprising the RBI Governor, three external members appointed by the government, and two central bank officers. It determines the benchmark policy rate by majority vote to maintain price stability while keeping growth in mind. The central government notifies the consumer inflation target every five years in consultation with the bank.
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