RBI governor to have casting vote in MPC

Economic Affairs Secretary Shaktikanta Das said on Tuesday the finance ministry was in the process of nominating three independent directors to the monetary policy committee (MPC) that would set inflation targets and the interest rate of the Reserve Bank of India (RBI). The MPC, tasked with setting the interest rates, will constitute six members and will give a casting vote to the RBI governor in case of a tie.

“The members from the RBI are known. You have the RBI governor, deputy governor and executive director. Three independent members are to be nominated by the government,” Das said, on the sidelines of an event in New Delhi.

“The process will be initiated after passage  of Finance Bill and its notification as an Act,” he added. The search panel for government appointees will comprise the Cabinet secretary, the economic affairs secretary, the  RBI governor and three experts in economics or banking nominated by the government. The members of the panel appointed by the government will hold office for four years and will not be eligible for reappointment.

The panel will meet at least four times a year and the government may convey its views in writing. The RBI will publish a monetary policy report every six months, with forecasts of inflation for between six and 18 months. If the RBI fails to meet the inflation target, it will provide reasons for failure, remedial actions as well as the estimated time within which the target will be achieved.