Functions of MPC

♤ RBI will be responsible for containing inflation targets at 4% (with a standard deviation of 2%) in the medium term.

♤ Central Government determines the inflation target in terms of the Consumer Price Index, once in every five years in consultation with the RBI.

♤ RBI would have to give an explanation in the form of a report to the Central Government, if it failed to reach the specified inflation targets. The report will give reasons for failure, remedial actions as well as estimated time within which the inflation target shall be achieved.

♤ RBI is mandated to publish a Monetary Policy Report every six months, explaining the sources of inflation and the forecasts of inflation for the coming period of six to eighteen months.

♤ RBI has to organize at least four meetings of the MPC in a year.

♤ The MPC takes decisions based on majority vote (by those who are present and voting). In case of a tie, the RBI governor will have the second or casting vote. The decision of the Committee would be binding on the RBI.