With new RBI chief named, FinMin to speed up monetary panel

With the appointment of the next Reserve Bank of India Governor, the Finance Ministry is now set to move ahead with two pending financial sector reforms over the next few months — the setting up of the Monetary Policy Committee and an independent debt management office.

“Members of the Monetary Policy Committee will be appointed in the next few weeks and the panel will be fully set up sometime in September,” said a senior government official, adding that the panel would be responsible for setting interest rates in the next bi-monthly policy review, which is scheduled on October 4.

The government on Saturday appointed Urjit Patel as the next RBI Governor, who would succeed Raghuram Rajan whose term expires on September 4. Unlike his predecessors, the monetary policy decision call will not solely rest on Patel with the formation of MPC.

In all, four members to the committee have to be appointed — one from the central bank and three nominated members by the government who can be experts in fields such as banking, finance or economics.

Though the MPC was notified in June, sources said the Finance Ministry was awaiting the appointment of the new RBI Governor to take forward the selection process of the three government nominated members.

A search-cum-selection panel led by the Cabinet Secretary with the RBI Governor and Economic Affairs Secretary and three experts will now shortlist the members.

Apart from the three government nominees, the six-member MPC would have the RBI Governor as its ex-officio chairman and two more members from the RBI. Rajan has already announced RBI Executive Director Michael Patra as a member and the other member will be the Deputy Governor in charge of monetary policy.

The Finance Ministry, which has also revived the proposal of setting up an independent debt management to manage the Centre’s borrowings, is also likely to restart discussions with the RBI. “There have been discussions on the structure of the public debt management agency and how to best set it up.

The intent is to make a formal announcement in the next Budget but it has to be discussed in detail with the RBI,” said the official.

The proposal to set up the PDMA had gained momentum last year when it was announced by Finance Minister Arun Jaitley in the Budget 2015-16.

But it was later withdrawn during the discussion on the Finance Bill, 2015 and had said a roadmap for a PDMA would be drawn up in consultation with the RBI.

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