{"id":1766,"date":"2024-03-29T21:10:12","date_gmt":"2024-03-29T15:40:12","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1766"},"modified":"2024-04-03T07:11:27","modified_gmt":"2024-04-03T01:41:27","slug":"q-which-of-the-following-statements-is-are-correct-regarding-the-monetary-policy-committee-mpc","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-which-of-the-following-statements-is-are-correct-regarding-the-monetary-policy-committee-mpc","title":{"rendered":"Q.\u00a0Which of the following statements is\/are correct regarding the Monetary Policy Committee (MPC)?"},"content":{"rendered":"\n
    \n
  1. It decides the RBI\u2019s benchmark interest rates,<\/li>\n\n\n\n
  2. It is a 12-member body<\/strong> including the Governor of RBI and is reconstituted every year.<\/li>\n\n\n\n
  3. It functions under the chairmanship<\/strong> of the Union Finance Minister.<\/li>\n<\/ol>\n\n\n\n

    Select the correct answer using the code given below: <\/p>\n\n\n\n

      \n
    • 1 only<\/li>\n\n\n\n
    • 1 and 2 only<\/li>\n\n\n\n
    • 3 only<\/li>\n\n\n\n
    • 2 and 3 only<\/li>\n<\/ul>\n\n\n\n
      \n

      Answer:<\/strong> (a) 1 only<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Monetary Policy Committee (MPC):<\/h5>\n\n\n\n
        \n
      • The Monetary Policy Committee (MPC) is a committee constituted by the Central Government and led by the Governor of RBI.<\/strong><\/li>\n\n\n\n
      • Monetary Policy Committee was formed with the\u00a0mission of fixing the benchmark policy interest rate (repo rate) to restrain inflation within the particular target level.<\/strong>\u00a0The RBI governor controls the monetary policy decisions with the\u00a0support and advice of the internal team<\/strong>\u00a0and the technical advisory committee.\n
          \n
        • Initially, the main decisions related to interest rates were taken by the Governor of RBI alone before the establishment of the committee.<\/li>\n\n\n\n
        • MPC was constituted under the Reserve Bank of India Act, 1934 as an initiative to bring more transparency and accountability<\/strong> in fixing the Monetary Policy of India. <\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • The Reserve Bank of India Act, 1934\u00a0(RBI Act) has been amended<\/strong>\u00a0by the Finance Act, 2016\u00a0\u00a0to provide for a statutory<\/strong>\u00a0and institutionalized\u00a0framework for a MPC.<\/strong>\n
            \n
          • Under<\/strong> Section 45ZB of the amended RBI Act<\/strong>, 1934, the central government is empowered to constitute a six-member MPC<\/strong>.<\/li>\n\n\n\n
          • The amended RBI Act, 1934 also provides for the inflation target (4% +-2%)<\/strong> to be set by the Government of India, in consultation with the Reserve Bank, once in every five years.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n
          • Composition:<\/strong>\n
              \n
            • MPC will have six members<\/strong> \u2013 the RBI Governor (Chairperson<\/strong>), the RBI Deputy Governor in charge of monetary policy<\/strong>, one official nominated by the RBI Board,<\/strong> and the remaining three members<\/strong> would represent the Government of India.<\/strong><\/li>\n\n\n\n
            • The external members hold office for a period of four years<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
            • The quorum<\/strong> for a meeting shall be four Members<\/strong>, at least one of whom shall be the Governor<\/strong> and, in his absence, the Deputy Governor, who is the Member of the MPC.<\/li>\n\n\n\n
            • The MPC takes decisions based on a majority vote.<\/strong> In case of a tie, the RBI governor will have the second or casting vote<\/strong>.<\/li>\n\n\n\n
            • The decision of the MPC would be binding on the RBI<\/strong>.<\/li>\n\n\n\n
            • MPC conducts meetings at least 4 times a year <\/strong>and the monetary policy is published after every meeting<\/strong> with each member explaining his opinions. <\/li>\n<\/ul>\n\n\n\n

              Objectives of Monetary Policy<\/strong>:<\/p>\n\n\n\n

                \n
              • To stabilize the business cycle.<\/li>\n\n\n\n
              • To provide reasonable price stability.<\/li>\n\n\n\n
              • To provide faster economic growth.<\/li>\n\n\n\n
              • Exchange Rate Stability.<\/li>\n<\/ul>\n\n\n\n
                Instruments of Monetary Policy<\/strong><\/h6>\n\n\n\n
                  \n
                • There are both direct and indirect instruments used for implementing monetary policy. Few include:\n
                    \n
                  • Repo rate <\/li>\n\n\n\n
                  • Reverse Repo rate<\/li>\n\n\n\n
                  • Liquidity Adjustment Facility (LAF)<\/li>\n\n\n\n
                  • Marginal Standing Facility (MSF)<\/li>\n\n\n\n
                  • Corridor<\/li>\n\n\n\n
                  • Bank Rate<\/li>\n\n\n\n
                  • Cash Reserve Ratio (CRR)<\/li>\n\n\n\n
                  • Statutory Liquidity Ratio (SLR)<\/li>\n\n\n\n
                  • Open Market Operations (OMOs)<\/li>\n\n\n\n
                  • Market Stabilisation Scheme (MSS)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

                    Select the correct answer using the code given below:  Answer: (a) 1 only Monetary Policy Committee (MPC): Objectives of Monetary Policy: Instruments of Monetary Policy<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[56],"class_list":["post-1766","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-56"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":56,"label":"2017"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1766","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1766"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1766\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1766"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}