Short of MPC members, RBI announces deferring monetary policy meeting

The central bank didn't give any reason, but the external members for the MPC have not been appointed by the government.

In an unprecedented move, the Reserve Bank of India (RBI) on Monday said it was deferring meetings of its monetary policy committee (MPC) scheduled on September 29, 30, and October 1. The revised dates will be notified later, it clarified.  

“The meetings of the MPC on September 29, 30, and October 1 as announced are being rescheduled. The dates of the MPC’s meetings will be announced shortly,” the RBI said in its brief statement. 

While the central bank did not assign any reason for the deferment, the government is yet to announce the external members for the six-member MPC. The past three external members — Pami Dua, Ravindra Dholakia, and Chetan Ghate — left office on September 22. 

The RBI governor is consulted as and when required. Chairman of the National Institute of Public Finance and Policy and former RBI governor Urjit Patel are also part of the search committee.  

According to sources, the MPC meeting will likely be conducted next week. While the search committee,  headed by Cabinet Secretary Rajiv Gauba, has zeroed in on the candidates and recommended them to the government, the appointment process is not yet completed yet as certain processes, such as security clearances of some members, have still not been done. 

he search committee includes RBI Governor Shaktikanta Das or a deputy governor representing him, NITI Aayog Vice-Chairman Rajiv Kumar, and Economic Affairs Secretary Tarun Bajaj.

Earlier, it was indicated by the government that the names would be cleared by September 28. Even if the names had been announced on Monday (September 28), it would have been impractical for the new inductees to dive into the MPC meetings straightaway. People familiar with the rules say the new members will have to navigate through a sea of formalities, including signing of documents. The central bank will also have to formally invite them to the meetings. The new members also need time to prepare ahead of the policy meetings. 

However, economists point out that the deferment is not going to materially impact the outcome of the meetings. The central bank is expected to keep the policy rates unchanged since inflation remains well above the upper tolerance band of 6 per cent, and past rate cuts have not been fully passed on either.   

It is possible that the next round of rate cuts may come only in the February meetings after evaluating the Budget numbers. All 10 economists and bond traders polled by Business Standard last week expected status quo to be maintained on rates, and the MPC to carry on with its accommodative stance.  

In its last MPC meeting in August, the central bank kept policy rates unchanged to help rein in inflation, and said the Covid-battered economy is particularly vulnerable. 

The RBI has cut policy rates by 250 basis points (bps) since February 2019, including 115 bps since the nationwide lockdown announced on March 24. The policy repo rate now stands at 4 per cent, while the reverse repo rate is 3.35 per cent.  

The central bank has also undertaken measures to boost liquidity. These should help with the policy rate transmission.  

On Monday, too, the central bank said the relaxations on its marginal standing facility, under which banks can dip into an additional 1 per cent of their deposit base by pledging bonds to avail of liquidity, will continue till March 31, 2021, instead of ending on September 30. This dispensation helps banks access additional funds of Rs 1.49 trillion.