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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Q. Monetary policy review by MPC: Discuss the role of monetary policy committee and Reserve Bank of India in monetary policy review.
Sep 23, 2016 Related to : GS paper-3

Ans :

Introduction-

Monetary policy of Reserve Bank of India will go under review October 4 as per its schedule. But this is the first time monetary policy review will held under the new regime of a monetary policy committee.

Monetary policy committee (MPC)-

  • It is a six member committee, which will take decisions related to RBI’s monetary policy and rate setting decisions.
  •  MPC consists of the Governor, a Deputy Governor and another official from RBI and three independent members to be selected by the Government of India.
  • Being a multi member body it is expected that MPC will bring value as well as transparency in rate setting decisions.

How it is deferent from existing practice-

  • Until recently it is RBI governor who used to take most of the decisions related to monetary policy. Now the same will be decided by MPC.
  • Earlier many committees like technique committee were advising the RBI governor on the extent and direction of change in policy rates. And RBI could accept or ignore any such decisions without assigning reasons.
  • Now the difference is that the discussion in the MPC will be recorded and made public. And the decisions were taken on the basis of majority vote.

RBI role-

  • In MPC, 3 of the 6 members are from the RBI, and the RBI governor has a casting vote to boot.
  • Hence the RBI will continue to set policy rates and play major role in monetary policy.
  • But only difference is now it will have to defend its decisions and the record of the discussion would be part of the public discourse.

Conclusion-

Till now RBI was having complete autonomy over monetary policy rates. But now the same will be decided by MPC, in which RBI as half member including preciding officer.  Though to some extent autonomy of RBI reduced, but still RBI remains in charge of monetary policy decisions.


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