The Centre brought the Monetary Policy Committee (MPC) one step closer to reality on Monday by notifying the changes made to the Reserve Bank of India (RBI) Act.

What would be MPC?
Monetary Policy Committee will have the responsibility to take decisions on monetary policy matters to meet inflation target as decided between Central Government and RBI.

 The six-member Committee— will comprise three members from RBI, including the Governor, who will be the ex-officio chairperson, a Deputy Governor and one officer of the central bank.

The other three members will be appointed by the Centre on the recommendations of a search-cum-selection committee to be headed by the Cabinet Secretary.These three members of MPC will be experts in the field of economics or banking or finance or monetary policy and will be appointed for a period of four years and shall not be eligible for re-appointment.

Decision making by MPC
The Committee is to meet four times a year and make public its decisions following each meeting. Decisions by MPC will be taken on majority basis and chairman of the committee will have casting vote only (and not veto power.)

Implications of setting up MPC
Earlier decisions on monetary policy were taken solely by RBI. With the establishment of MPC, Central Government will have equal say in deciding on Monetary policy matters.