2.7. Monetary Policy Committee (MPC)

MPC was set up consequent to the agreement reached between Government and RBI to task RBI with the responsibility for price stability and inflation targeting. The Reserve Bank of India and Government of India signed the Monetary Policy Framework Agreement on 20 February 2015.

The MPC replaced the erstwhile system where the RBI governor, with the aid and advice of his internal team and a technical advisory committee, has complete control over monetary policy decisions.

Pursuant to this, it was written into the preamble of the RBI Act that the primary objective of the monetary policy is to maintain price stability, while keeping in mind the objective of

growth, and to meet the challenge of an increasingly complex economy, RBI would operate a Monetary Policy Framework.Composition of MPC Functions of MPC