The Government has appointed all Members of the Monetary Policy Committee (MPC). The Monetary Policy Committee(MPC) of the Reserve Bank of India (RBI) has been constituted by the Central Government in accordance with the provisions of the Reserve Bank of India Act, 1934 (RBI Act) and has been notified in the Gazette of India, Extraordinary on 29.9.2016 as follows:-

(i) Governor of the Reserve Bank of India-Chairperson, ex officio;

(ii) Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy-Member, ex officio

(iii) One officer of the Reserve Bank of India to be nominated by the Central Board-Member, ex officio;

(iv) Shri Chetan Ghate, Professor, Indian Statistical Institute -Member;

(v) Professor Pami Dua, Director, Delhi School of Economics-Member; and

(vi) Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad- Member.

The Members of the MPC referred to in clause (iv) to (vi) above shall hold office for a period of four years or until further orders, whichever is earlier.

MPC has tasked with deciding benchmark interest rates. The MPC is entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level, which has been fixed for a period of 5 years upto March, 2021 by the Government at 4% with a range of +/- 2%. The decision of the MPC shall be binding on RBI.

MPC is mandated to contain the inflation within the specified target levels. Further, if the average inflation is more than the upper tolerance level of 4% + 2%, that is, 6%, or less than the lower tolerance level of 4% – 2%, that is, 2%, for any three consecutive quarters, it would mean a failure to achieve the inflation target. Where RBI fails to meet the inflation target, in terms of the provisions of RBI Act, it shall set out a report to the Central Government stating the reasons for failure to achieve the inflation target; remedial actions proposed to be taken by RBI; and an estimate of the time-period within which the inflation target shall be achieved pursuant to timely implementation of proposed remedial actions.

This was stated by Shri Arjun Ram Meghwal, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.

Monetary Policy Committee sets benchmark policy rate to contain inflation within statutory target; decisions binding on central bank. The Government constituted the Monetary Policy Committee under the Reserve Bank of India Act, assigning it responsibility to fix the benchmark policy rate with decisions binding on the Reserve Bank. The MPC must contain inflation within a government-specified target and, if average inflation breaches the tolerance band for three consecutive quarters, the RBI must report to the Central Government reasons for failure, proposed remedial actions and an estimated timeframe for meeting the target.