Process of Monetary Policy formulation

Under the amended RBI Act, the monetary policy making is as under:

♤ The MPC is required to meet at least four times in a year

♤ The quorum for the meeting of the MPC is four members.

♤ Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.

♤ The resolution adopted by the MPC is published after conclusion of every meeting of the MPC in accordance with the provisions of Chapter III F of the Reserve Bank of India Act, 1934.

On the 14th day, the minutes of the proceedings of the MPC are published which include:

a) the resolution adopted by the MPC

b) the vote of each member on the resolution, ascribed to such member

c) the statement of each member on the resolution adopted.

Once in every six months, the Reserve Bank is required to publish a document called the Monetary Policy Report to explain:

a) The sources of inflation; and

b) the forecast of inflation for 6-18 months ahead.

As per the target set by MPC in 2016 the current inflation target given for five years expires in 2021. With MPC’s term ending in September, it is time to objectively look at the performance of the framework.