Civil Services Prep

Prelims 2017 · Economy · Question 86

Which of the following statements is/are correct regarding the 'Monetary Policy Committee (MPC)'?

  1. It decides the RBI's benchmark interest rates.
  2. It is a 12-member body including the Governor of RBI and is reconstituted every year.
  3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

  1. 1 only
  2. 1 and 2 only
  3. 3 only
  4. 2 and 3 only

Answer

1 only

1. Correct. The Monetary Policy Committee determines the RBI’s policy repo rate, which is the benchmark interest rate for monetary policy.

2. Incorrect. The MPC is a 6-member body, not 12-member: 3 from RBI and 3 external members appointed by the Central Government. External members have a 4-year term; it is not reconstituted every year.

3. Incorrect. The MPC is chaired by the Governor of RBI, not the Union Finance Minister.

Therefore, only statement 1 is correct.

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