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Ahead of the monetary policy review on October 4, Reserve Bank of India Governor Urjit Patel met Finance Minister Arun Jaitley here on Thursday. This will be Patel’s first monetary policy review after assuming charge as Governor on September 4.
Patel did not offer any comment on his meeting with Jaitley.
The upcoming monetary policy review assumes significance as it is likely to be the first meeting when the newly-formed monetary policy committee (MPC) will go about with the task of setting interest rate — a decision hitherto taken by the RBI Governor.
The Government had last week named three academics to join the RBI Governor, his deputy in charge of monetary policy and another RBI executive, on the new MPC.
There are expectations that policy rates would be cut in the upcoming review in the backdrop of easing inflation.
The RBI had since January 2015 reduced policy rates by 150 basis points with an aim to boost economic growth.
Monetary policy committee The Centre on Thursday notified the constitution of the monetary policy committee (MPC) with six members. While the RBI Governor will be the Chairperson (ex-officio) of the MPC, the Deputy Governor of RBI in charge of monetary policy and one officer of the RBI to be nominated by the central board will be ex-officio members.
Chetan Ghate, Professor, Indian Statistical Institute (ISI); Professor Pami Dua, Director, Delhi School of Economics (DSE), and Ravindra H. Dholakia, Professor, Indian Institute of Management (IIM), have been notified as members of the committee.
MPC members shall hold office for a period of four years, with immediate effect or until further orders, whichever is earlier, according to the notification.
It may be recalled that the Reserve Bank of India Act, 1934 (RBI Act) had been amended by the Finance Act, 2016, to provide for a statutory and institutionalised framework for a MPC for maintaining price stability, while keeping in mind the objective of growth.
The MPC would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. It is felt that a committee-based approach for determining the monetary policy will add lot of value and transparency to monetary policy decisions. The meetings of the MPC would be held at least four times a year and it shall publish its decisions after each such meeting.
The Centre had, in August, this year, in consultation with the RBI, notified the inflation target of 4 per cent till March 31, 2021. An upper tolerance level of 6 per cent and lower tolerance level of 2 per cent has also been specified.
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