New external MPC members may keep markets guessing

News: The three new external members of the Reserve Bank of India’s Monetary Policy Committee (MPC) will be taking charge at a time when many believe interest rate curve is at an inflection point.

1. Monetary Policy Committee (MPC) is a statutory body under the RBI Act 1934.

2. It is responsible for fixing the benchmark interest rate in India.

3. The prime objective of MPC is to maintain price stability while keeping in mind the objective of growth.

4. It comprises of 6 members- 3 officials of RBI (Governor of RBI, Deputy Governor in charge of monetary policy, an officer nominated by the central board of the regulator), and 3 external members nominated by GOI.

5. The external members are selected by a 6-member search-cum-selection committee headed by Cabinet Secretary.

6.The governor of RBI is the ex-officio chairperson of the MPC committee.

7. Decisions in MPC are taken by majority vote. In case of tie, the governor exercises a casting vote.

8. Govt of India has mandated MPC to maintain 4% annual inflation until 31 March 2026 with an upper tolerance of 6% and a lower tolerance of 2%.