RBI's MPC to get new external members as current terms expire in October

The RBI MPC consists of six members: three from the RBI, including the governor, and three external members appointed by the government

The central government is set to appoint new external members to the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) before its next scheduled meeting from October 7-9, according to a report by CNBC-TV18. This decision comes as the term of the current external members is due to expire in early October, near the end of their four-year tenure.

What is the RBI MPC?

The MPC is a critical body responsible for setting India's monetary policy. It consists of six members: three from the RBI, including the governor, and three external members appointed by the government.

The MPC’s primary mandate is to maintain price stability while considering economic growth, meeting at least four times a year to decide on key policy rates, including the crucial repo rate, which is being maintained at 6.5 per cent. Each member of the committee has one vote, and in the event of a tie, the RBI governor has the casting vote.

Who are the current external members of RBI MPC?

Currently, the external members are Ashima Goyal, an economist and professor at the Indira Gandhi Institute of Development Research (IGIDR), Shashanka Bhide, a senior advisor at the National Council of Applied Economic Research (NCAER), and Jayanth R Varma, a professor of finance at the Indian Institute of Management, Ahmedabad (IIM-A).

All three were appointed on October 5, 2020, and their terms are set to conclude in October 2024.

As per the RBI Act, these positions are not subject to extension, necessitating the appointment of new members or reappointments. The Appointments Committee of the Cabinet (ACC), chaired by the Prime Minister, is responsible for approving the new members.

The current panel, comprising Goyal, Bhide, and Varma, met for the first time in October 2020.

The upcoming appointments will mark a significant moment for the MPC, especially as it prepares for its 49th meeting to decide on monetary policy in a challenging economic environment.

The new external members will join the RBI governor, Shaktikanta Das, and other RBI officials, including Deputy Governor Michael Debabrata Patra and Rajiv Ranjan, an officer nominated by the Central Board.

As the ACC finalises the appointments, the focus will be on how the new external members will influence the MPC’s decisions amid ongoing economic uncertainties, including inflationary pressures and global financial market volatility. The upcoming October meeting is expected to be closely watched by market participants and policymakers alike.