The centre has notified the formation of Monetary Policy Committee (MPC) under the RBI which will take decision on interest rate or repo rate setting in future. MPC will bring significant changes in the power the RBI governor while deciding on repo rate. At present, the Technical Advisory Committee which is chaired by the Governor takes decisions on repo rate. But the RBI Governor has a veto power.
According to the government sources, the MPC is responsible for bringing “value and transparency to monetary policy decisions.
Under MPC, the governor has a casting vote and doesn’t enjoy veto power. Decisions will be taken on the basis of majority vote.
There are six members in the MPC and three are from the RBI including the Governor, a Deputy Governor who will be the ex-officio chairperson and one officer of the central bank.
The other three members will be appointed by the Centre on the recommendations of a search-cum-selection committee which is to be headed by the Cabinet Secretary.
“These three members of MPC will be experts in the field of economics or banking or finance or monetary policy and will be appointed for a period of four years and shall not be eligible for re-appointment,” says the statement which announced the formation of the MPC.
The Committee is to meet four times a year and make public its decisions following each meeting.