Why is it in the News?

The RBI’s Monetary Policy Committee (MPC) has prudently opted to persist with its objective of ‘ensuring that inflation progressively aligns to the target’ by keeping benchmark interest rates unchanged, and sticking with its stance of ‘withdrawal of accommodation’.

About the Monetary Policy Committee (MPC):

• The Monetary Policy Committee (MPC) is a committee of the Reserve Bank of India (RBI), chaired by its Governor.
• The RBI shall organise at least four meetings of the Monetary Policy Committee in a year.
• Established under Section 45ZB of the RBI Act, 1934, the government forms this six-member committee.

Composition of MPC:

• Comprising six members, three are from the RBI, while the remaining members are appointed by the Government of India.
• Members include the RBI Governor (Chairperson), the RBI Deputy Governor responsible for monetary policy, one official nominated by the RBI Board, and three members proposed by the Government of India (chaired by the Cabinet Secretary).
• MPC members serve a single four-year term and are not eligible for reappointment.

Functions:

• The primary responsibility of the MPC is to determine the benchmark policy interest rate (repo rate) to manage inflation within the prescribed target level.
• The current mandate of the committee is to maintain annual consumer price index (CPI) inflation at 4% within a band of +/- 2% until March 31, 2026.