GS 3: Economy

Why in News?

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) cut interest rates by 25 basis points. This is the third time successively that the six-member MPC has decided on a 25-basis points rate cut. The last time the RBI had to cut rates three times in a row was in 2013.

MPC:

• The Monetary Policy Committee of India is responsible for fixing the benchmark interest rate in India. The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
• The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
• Decisions are taken by majority with the Governor having the casting vote in case of a tie.
• The members need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.

Composition of MPC:

• Governor of the Reserve Bank of India – Chairperson, ex officio
• Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio
• One officer of the Reserve Bank of India to be nominated by the Central Board – Member
• Other three members are nominated by the Government.