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Monetary Policy Committee (MPC): composition and role
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The Monetary Policy Committee (MPC) is the six-member statutory committee that decides the policy repo rate needed to meet the inflation target. It was created by an amendment to the RBI Act, 1934 through the Finance Act 2016, replacing the earlier practice where the Governor decided with advice from a technical panel. The first MPC meeting was held in October 2016.
Composition
| Members | Number | Who |
|---|---|---|
| RBI | 3 | The Governor (chair), the Deputy Governor in charge of monetary policy, and one RBI officer nominated by the Central Board |
| External | 3 | Experts appointed by the Central Government |
External members serve a term of four years and cannot be reappointed. The Governor has a casting vote only when the votes are tied.
How it works
- Meetings. The law requires at least four a year; in practice the MPC meets six times, on a calendar announced before the financial year begins.
- Quorum. Four members, with the Governor or, in the Governor's absence, the Deputy Governor present.
- Decision. By majority, each member having one vote. Members record their votes and reasons.
- Communication. The Governor announces the decision in the Monetary Policy Statement. The minutes are published on the fourteenth day after the meeting.
- Report. The RBI publishes a Monetary Policy Report twice a year, reviewing inflation and growth.
Its mandate
The MPC works under the inflation targeting framework, aiming for the CPI inflation target set by the government while supporting growth. It looks at CPI inflation, growth data, global conditions and liquidity before voting. Its rate decision then sets the centre of the corridor used in the liquidity adjustment facility.
How bank exams ask about it
Number-and-body stems dominate: "how many members are in the MPC", "who chairs it", "who appoints the external members", and "what is the term of external members". Also expect "which Act created the MPC" and "who has the casting vote". Put these facts in your banking awareness notes and re-check the names of current members in a recent news source because they change.
Where to find current details
Members, meeting dates, resolutions and minutes are on the MPC page at rbi.org.in.
Frequently asked questions
Does the Governor always vote?
Yes. The Governor is a member with a vote like the others, and gets the extra casting vote only in a tie.
What happens if the votes are tied?
With six members a 3-3 split is possible. In that case the Governor, who is the chair, uses a second, casting vote to settle the decision.
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- Repo rateRepo rate is the rate at which the RBI lends short-term money to banks against government securities. How it works, what a change does and how exams ask it.
- Inflation targetingIndia follows flexible inflation targeting: the RBI aims for a CPI target with a tolerance band. How the framework works, what counts as failure and exam facts.
- CPI inflationCPI inflation tracks the price of a fixed basket of goods and services bought by households. Meaning, formula, who publishes it, food weight and exam facts.
- Standing deposit facilityThe standing deposit facility lets banks park surplus funds with the RBI without collateral and sets the floor of the rate corridor. Meaning and exam facts.
- Liquidity adjustment facilityThe liquidity adjustment facility is the RBI's daily window for injecting or absorbing cash. Meaning, repo, SDF and MSF corridor, history and exam questions.
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