Moving a step closer to setting up the Monetary Policy Committee (MPC), the Finance Ministry on Monday notified the provisions of the amended Reserve Bank of India Act, 1934.
“The statutory basis of the Monetary Policy Committee (MPC) is now made effective,” it said in a statement.
The Rules for the procedure for selection of members of the MPC and terms and conditions of their appointment and factors constituting failure to meet inflation target under the MPC Framework have also been notified, it added.
“A Committee-based approach will add lot of value and transparency to monetary policy decisions,” said the Finance Ministry, adding that the MPC will meet at least four times a year and publicise its decisions.
An agreement for a monetary policy framework was signed between the RBI and the Finance Ministry in January last year.
The six-member committee will set interest rates to lower consumer price inflation to 4 per cent from 2016-17. Each member of the committee will have one vote and the Reserve Bank of India Governor will have a second or casting vote, in case of a tie.