RBI’s MPC Status Quo on Liquidity

Key Components of Monetary Policy

Quantitative Tools

Qualitative Tools

• CRR (Cash Reserve Ratio)
• SLR (Statutory Liquid Ratio)
• Repo Rate
• Reverse Repo Rate
• Bank Rate
• Open Market Operations

• Moral Suasion
• Direct Action
• Selective Credit Control
• Margin Requirements

Monetary Policy Committee (MPC)

• It was constituted in 2016 as a statutory body to formulate monetary policy in India.
• Legal basis – As per Section 45ZB of the RBI Act, 1934.
• Composition – 6-member body
  • Governor of RBI (Chairperson, ex officio)
  • Deputy Governor of RBI in charge of Monetary Policy (Member, ex officio).
  • 1 officer of RBI nominated by the Central Board of Directors (Member, ex officio).
  • 3 members appointed by the Central Government.
• Tenure – The appointed members serve for 4 years or until further orders, whichever is earlier, and are not eligible for re-appointment.
• Meetings – The MPC is required to meet at least 4 times in a year.
• Quorum – 4 members.
• Decision – The decision of the committee would be binding on the RBI.
  • Voting – By a majority of members present and voting.
  • Tie-breaker – RBI Governor has the casting vote.
• Functions – Determine the policy interest rates required to achieve the inflation target set by the government, while supporting economic growth.