MONETARY POLICY COMMITTEE (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     4th December 2023        

Context: The six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is expected to keep the policy repo rate unchanged for the fifth consecutive policy review.

Monetary Policy Committee (MPC)

  • About: It was established based on the recommendation of the Urjit Patel Committee.
  • Set up: Under Section 45ZB of the RBI Act of 1934 by the Union government.
  • Composition: It is a 6 member committee. There are in total three internal members and three external experts. The RBI Governor and Deputy Governor are also members of the MPC Committee.
  • Objectives: To improve the repo rate, reverse repo rate, liquidity, etc.
  • Instruments of Committee: Repo rate, Reverse Repo rate, Marginal Standing Facility (MSF), Bank Rate, Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), Open Market Operations (OMOs)

Repo rate: The Repo Rate is the interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks.

Reverse repo rate: Reverse repo is the inverse contract to the repo rate. The reverse repo rate is the rate at which the RBI borrows funds from the country's commercial banks.