What is the Monetary Policy Committee (MPC)?
The Monetary Policy Committee (MPC) is a body constituted by the Reserve Bank of India (RBI) to take key decisions on interest rates and other monetary policy tools to control inflation, ensure economic growth, and maintain financial stability in the country.
This topic is extremely important for Banking Awareness sections in IBPS PO, SBI PO, RBI Grade B and other banking exams.
📌 Background of MPC
- Before 2016, RBI Governor alone took monetary policy decisions in consultation with internal advisors.
- To bring more transparency and accountability, the Monetary Policy Committee (MPC) was formed in 2016 under the amended RBI Act, 1934.
- MPC was formed in accordance with the recommendation of the Urjit Patel Committee (2014).
🏛️ Composition of Monetary Policy Committee
The MPC is a 6-member committee, consisting of both RBI officials and government-appointed experts:
| Member | Appointed By |
|---|---|
| RBI Governor – Chairperson (ex-officio) | RBI |
| Deputy Governor in charge of Monetary Policy | RBI |
| One RBI Officer nominated by Central Board | RBI |
| Three Independent Members | Appointed by Central Government |
Note: The decisions are made based on majority vote. In case of a tie, the RBI Governor has the casting vote.
🎯 Objectives of MPC
- Maintain price stability (inflation control)
- Ensure economic growth
- Promote financial stability
- Enhance transparency and accountability in policy making
💡 Key Function: Setting the Repo Rate
The MPC meets at least 4 times a year (usually every 2 months) to decide the repo rate — the rate at which RBI lends money to commercial banks.
- If inflation is high → MPC may increase the repo rate
- If growth is weak → MPC may reduce the repo rate to boost lending
The committee also provides a statement explaining the reasons behind its decisions, helping markets and people understand the monetary stance.
📊 Inflation Targeting Framework
India follows a Flexible Inflation Targeting (FIT) framework.
- The government (in consultation with RBI) sets the inflation target.
- Currently, the target is 4% Consumer Price Index (CPI) inflation, with a tolerance band of +/- 2%.
- This means CPI inflation should remain between 2% to 6%.
Fact for Exams: If inflation stays outside the target range for 3 consecutive quarters, the MPC must give explanations to the Government.
👥 Current Members of MPC (As of 2025)
Check the latest members list before your exam. As of 2025, the MPC includes:
- Shaktikanta Das – RBI Governor (Chairperson)
- Michael D. Patra – Deputy Governor
- Dr. Rajiv Ranjan – RBI Executive Director
- Three external members (updated periodically)
✅ You can verify the updated members list on RBI’s official website.
📘 Importance of MPC in Exams
- Expect MCQs on the number of MPC members, their roles, and repo rate decisions.
- Know who appoints MPC members (RBI & Government).
- Stay updated with the latest repo rate before the exam.
📝 Conclusion
The Monetary Policy Committee plays a vital role in India’s economic management by ensuring inflation is kept under control while also supporting growth. It has brought more accountability and transparency to India's monetary policy framework.
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