Economics • Banking & FinanceMedium
What is the primary function of the 'Monetary Policy Committee' established under the provisions of the Reserve Bank of India Act, 1934?
A. To determine the benchmark policy interest rate required to achieve the inflation target✓ Correct Answer
B. To audit the financial statements of all public sector commercial banks annually
C. To fix the corporate tax rates applicable to domestic and foreign banking corporations
D. To manage foreign direct investment inflows across sensitive manufacturing sectors
💡 Solution & Explanation
The Monetary Policy Committee is entrusted with fixing the benchmark policy repo rate to maintain price stability while keeping in mind the objective of growth. It was constituted under Section 45ZB of the amended Reserve Bank of India Act, 1934, comprising six members with the Governor acting as chairperson. The government notifies the inflation target once every five years in consultation with the central bank.
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