Syllabus: GS-III
Subject: Economy
Topic: Monetary policies and instruments
Issue: Monetary Policy
Context: Monetary Policy Committee (MPC) member Jayanth R. Varma dissented the repo rate of 6.5% in the MPC meeting.
- Repo rate, short for repurchase rate, is the rate at which the RBI lends short-term money to commercial banks.
Monetary Policy Committee:
- Constituted in 2016 by amending RBI Act,1934.
- Composition: It is a six-member committee, three from RBI and three appointed by the central government.
- The Governor of RBI – ex-officio chairperson of the committee.
- Objective – To maintain price stability while keeping in mind the objective of growth.
- The MPC determines the Policy Rate(repo rate) to achieve inflation target and the decided repo rate is binding on the RBI.
- The MPC is mandated to meet at least four times in a year.
- Voting: Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.
| Inflation target:
● As per RBI Act 1934, the Central Government will determine the inflation target in terms of the Consumer Price Index(CPI), once in every five years. ● The current inflation target is between 2% to 4%. |
