updated on March 23rd, 2019
11. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?
1. It decides the RBI‘s benchmark interest rates.
2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
3. It functions under the chairmanship of the Union Finance Minister.
Select the correct answer using the code given below :
(a) l only
(b)1 and 2 only
(c) 3 only
(d) 2 and 3 only
Answer is ‘A’
It was a major news break, and perhaps the most significant reform in India’s monetary policy framework in past few decades.
Justification: Statement 1: It decides the repo rates, CRR, SLR etc. It replaced the earlier system of policy rate veto by the RBI governor.
Statement 2: It consists of six members (RBI Governor, Deputy Gov RBI, One RBI officer and three members nominated by the government), and they hold office for a period of four years.
Statement 3: The Governor of the RBI is the ex-officio Chairperson of MPC.
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. 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