The Reserve Bank of India Act, 1934 (RBI
Act) has been 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 would be entrusted with the task of fixing the benchmark
policy rate (repo rate) required to contain inflation within the specified
target level. A Committee-based approach for determining the Monetary Policy
will add lot of value and transparency to monetary policy decisions. The
meetings of the Monetary Policy Committee shall be held at least 4 times a year
and it shall publish its decisions after each such meeting.
The provisions of the RBI Act relating
to Monetary Policy have been brought into force through a Notification in the
Gazette of India Extraordinary on 27.6.2016. The factors constituting failure
to meet inflation target under the Monetary Policy Committee Framework have
also been notified in the Gazette on 27.6.2016. The Government, in consultation
with RBI, has 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 under:-
Inflation Target: Four
per cent.
Upper tolerance level: Six
per cent.
Lower tolerance level: Two
per cent.
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. In exercise of the powers conferred by section 45ZB of the Reserve
Bank of India Act, 1934, the Central Government has accordingly constituted,
through a Gazette Notification dated 29th Sept 2016, the Monetary
Policy Committee of RBI, with the following composition, namely:-
(a) The Governor of the
Bank—Chairperson, ex officio;
(b) Deputy Governor of the Bank,
in charge of Monetary Policy—Member, ex officio;
(c) One officer of the Bank to be
nominated by the Central Board—Member, ex officio;
(d) Shri Chetan Ghate, Professor,
Indian Statistical Institute (ISI) —Member
(e) Professor Pami Dua, Director,
Delhi School of Economics (DSE) — Member
(f) Dr. Ravindra H. Dholakia,
Professor, Indian Institute of Management (IIM), Ahmedabad— Member
The Members of the Monetary Policy
Committee appointed by the Central Government shall hold office for a period of
four years, with immediate effect or until further orders, whichever is
earlier.
********
DSM/KA