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:
- A. 1 only
- B. 1 and 2 only
- C. 3 only
- D. 2 and 3 only
Answer: A
Explanation
The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016, to provide for a statutory and institutionalised framework for a Monetary Policy Committee it would be entrusted with the task of fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level. Hence Statement 1 is correct. As per the provisions of the RBI Act, out of the six Members of Monetary Policy Committee, three Members will be from the RBI and the other three Members of MPC will be appointed by the Central Government. Hence statement 2 is not correct. The Governor of the Bank— ex officio Chairperson of MPC. Hence statement 3 is not correct.