Economics • Indian EconomyHard
Analyze the mandate and functioning of the 'Monetary Policy Committee' in India. What voting mechanism determines policy repo rate decisions under the Reserve Bank of India Act, 1934?
A. Decisions are taken by a majority vote of total members present and voting, with the RBI Governor casting a second or casting vote in case of a tie✓ Correct Answer
B. Decisions require a mandatory unanimous consensus among all six appointed members failing which the matter is referred to Parliament
C. Decisions are taken by the Union Finance Minister upon receiving non-binding advisory recommendations from the central bank Governor
D. Decisions are determined exclusively by external expert members appointed by the Prime Minister without participation from bank executives
💡 Solution & Explanation
The Monetary Policy Committee comprises six members, three from the Reserve Bank of India and three external members appointed by the central government, with decisions determined by a majority vote of those present and voting. Section 45ZB of the Reserve Bank of India Act, 1934 provides that in the event of an equality of votes, the Governor possesses a casting vote. This institutionalized framework replaced the earlier single-person decision-making system of the RBI Governor, enhancing transparency and accountability in interest rate setting. The committee is mandated to meet at least four times a year.
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