Economics • Banking & FinanceEasy
What is the primary role of the 'Monetary Policy Committee (MPC)' constituted under the Reserve Bank of India Act, 1934?
A. To determine the benchmark policy interest rate required to achieve the inflation target set by the government.✓ Correct Answer
B. To audit the financial statements and non-performing assets of public sector banks.
C. To regulate foreign direct investment caps across various industrial sectors.
D. To oversee the issuance and circulation of commemorative coins and currency notes.
💡 Solution & Explanation
The Monetary Policy Committee is a statutory body constituted under Section 45ZB of the Reserve Bank of India Act, 1934, tasked with determining the benchmark repo rate needed to achieve the targeted consumer inflation rate. Incorrect options attribute tasks like commercial bank auditing or foreign investment regulation to the MPC, which fall under separate supervisory domains. The committee comprises six members with a casting vote assigned to the RBI Governor. The inflation target is formally mandated by the central government in consultation with the RBI every five years.
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