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Monetary Policy Committee (MPC)

Monetary Policy Committee (MPC)
Highlights

Monetary policy is the process by which monetary authority of a country, in India is it Reserve Bank of India generally central bank controls the...

Monetary policy is the process by which monetary authority of a country, in India is it Reserve Bank of India generally central bank controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth.

The Reserve Bank of India Act, 1934 (RBI Act) was amended by the Finance Act, 2016, to provide for a statutory and institutionalised framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth.

The Monetary Policy Committee is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. As per the provisions of the RBI Act, out of the six Members of Monetary Policy Committee, three Members will be from the RBI and the other three Members of MPC will be appointed by the Central Government.

The Government of India, in consultation with RBI, notified the 'Inflation Target' in the Gazette of India Extraordinary dated 5th August 2016 for the period beginning from the date of publication of this notification and ending on the March 31, 2021 as four percent. At the same time lower and upper tolerance levels were notified to be two and six percent, respectively.

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