Home / Industry / Banking /  RBI's new monetary policy committee has its task cut out

MUMBAI : The Reserve Bank of India on Tuesday announced that the meeting of the new monetary policy committee has been scheduled from 7 to 9 October.

The newly inducted members include Prof. Ashima Goyal is Professor, Indira Gandhi Institute of Development Research, Prof. Jayanth R. Varma, Professor, Indian Institute of Management, Ahmedabad and Dr. Shashanka Bhide, Senior Advisor, National Council of Applied Economic Research, Delhi— Member

The appointment of these members signal a change in government’s focus to bring divergent views to policy making. The government choice of appointing Jayant Verma, an expert in financial markets, along with senior economists Ashima Goyal and Shashank Bhide suggest the renewed emphasis on financial markets in policy making. Referring to the comments made by some of these members recently, market participants decipher that the MPC could be tilted in favour of a dovish stance.

The announcement comes after the appointment of economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as the new members of the rate setting body. The appointment of the three members of the RBI was issued by a gazette notification by the Government of India on late Monday evening.

As per the RBI Act, the three new members would have four-year terms.

The RBI had postponed the last meeting of the MPC scheduled during 29 September to 1 October, which must have a quorum of four, as the appointment of independent members was delayed.

The new members replace Chetan Ghate, professor at the Indian Statistical Institute; Pami Dua, director at the Delhi School of Economics (DSE); and Ravindra Dholakia, professor at the Indian Institute of Management, Ahmedabad.

The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the RBI governor, is made up of external independent members.

As per the RBI Act, the external members can hold office for a period of four years and are not eligible for re-appointment.

The other ex-officio members of the MPC are Reserve Bank Governor, Deputy Governor (in-charge of monetary policy) and one RBI officer to be appointed by the central board.

The MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

The external members of the MPC are appointed by the central government from amongst persons of ability, integrity and standing, having knowledge and experience in the field of economics, banking, finance or monetary policy.

The last meeting of the MPC was held from August 4 to 6, 2020. It was the 24th meeting of the rating-setting panel.

ABOUT THE AUTHOR

Gopika Gopakumar

Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.
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