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Economy
2017
Monetary Policy
RBI and Functions

Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)?

  1. It decides the RBI’s benchmark interest rates.
  2. It is a 12-member body including the Governor of RBI and is reconstituted every
  3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below :

B.1 and 2 only
D.2 and 3 only
C.3 only
A.1 only

Correct Answer: Option A

The Monetary Policy Committee (MPC) is a crucial body determining India's monetary policy.

Statement 1: The MPC is responsible for setting the RBI's benchmark interest rates, such as the repo rate, CRR (Cash Reserve Ratio), and SLR (Statutory Liquidity Ratio). This replaced the previous system where the RBI Governor had the final veto power on policy rates. Statement 1 is correct.

Statement 2: The MPC consists of six members: the RBI Governor, the Deputy Governor of the RBI, one RBI officer, and three members nominated by the government. The nominated members hold office for a term of four years. Thus, it is not a 12-member body. Statement 2 is not correct.

Statement 3: The Governor of the RBI serves as the ex-officio Chairperson of the MPC, not the Union Finance Minister. Statement 3 is not correct.

Hence, only statement 1 is correct.

Sources:

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