New Delhi: The Finance Ministry is in the process of nominating three independent directors to Monetary Policy Committee (MPC) which will fix the benchmark interest rate of the RBI and set inflation targets.
"Members from Reserve Bank are known that is already mentioned in the Act itself. You have RBI Governor, Deputy Governor and Executive Director. Now from the government side three independent members are to be nominated," Economic Affairs Secretary Shaktikanta Das said on the sidelines of an event organised by ADB here.
The government nominees to the MPC will be selected by a search-cum-selection Committee under Cabinet Secretary with RBI Governor, Economic Affairs Secretary and three experts in the field of economics / banking / finance / monetary policy as its members.
The process to constitute MPC will be initiated after passage of Finance Bill, 2016 and its notification as an Act, he added. The Bill is likely to be passed in Parliament in a day or two.
The six-member panel will set interest rates to bring consumer or CPI inflation to pre-set targets.
Setting up of MPC is being done by amending the Reserve Bank of India Act, 1934, through the Finance Bill, 2016.
Each member shall have one vote and in case of tie, the Governor shall have a second or casting vote.
Presently, the Governor has overriding powers to accept or reject the recommendation of RBI's panel on monetary policy.
Members of the MPC will be appointed for a period of four years and shall not be eligible for reappointment.
MPC will meet at least four times in a year and the government may, if it considers necessary, convey its views in writing to the MPC from time to time.
RBI will publish Monetary Policy Report every six months explaining the sources of inflation and the forecasts of inflation for the period between six to 18 months.
If RBI fails to meet the inflation target, it shall in the report give reasons for failure, remedial actions as well as estimated time within which the inflation target shall be achieved.