After appointing Urjit Patel as the next RBI Governor, the government is now expected to finalise the names of three members to the interest rate setting panel MPC in the next few days. The government nominees to the MPC have been shortlisted by a Search-cum-Selection Committee headed by the Cabinet Secretary with RBI Governor and Economic Affairs Secretary and three experts in the field of economics or banking or finance or monetary policy as its members. The decision is expected in the next few days or may be in the beginning of the next month, sources privy to the development said.
The next bi-monthly RBI policy, scheduled on October 4, will be decided by the Monetary Policy Committee (MPC). The MPC was set up by amending the Reserve Bank of India Act, 1934, through the Finance Bill 2016. Under this new system, the RBI Governor is ex-officio Chairperson. Besides, RBI Deputy Governor in-charge of the monetary policy and an office bearer of the Central bank are the other two members in the committee. Since Urjit Patel has been elevated as the next RBI Governor, the monetary policy department has to be looked after by any of the three deputy governors till the appointment of the fourth regular Deputy Governor. So, even if the appointment takes time, the MPC can continue the work with regard to setting up interest rate to meet the inflation target fixed by the government. Under the agreement with the government, RBI is committed to anchoring retail inflation at 4 per cent (plus/minus 2 per cent) and has set itself a target of 5 per cent by next March as part of a ‘glide path’ to achieving the median mark. The Governor will have a casting vote once the country shifts to the panel system.