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 year.
3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

1. 1 only
2. 1 and 2 only
3. 3 only
4. 2 and 3 only

Explanation

Statements 2 and 3 are incorrect

• The Monetary Policy Committee is a six-member committee headed by the RBI Governor.
• Three members from the RBI:
  • The Governor of RBI — (Chairperson), Member, ex officio;
  • Deputy Governor of RBI, in charge of Monetary Policy — Member, ex officio;
  • One officer of RBI to be nominated by the Central Board of RBI — Member, ex officio.
• Three independent members to be selected by the Government.

Statement 1 is correct

• MPC decides the benchmark policy rate (repo rate) required to contain inflation within the specified target level set by RBI.

Answer: (a) 1 only; Difficulty Level: Medium