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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:

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: Correct Answer 1 only

The correct answer is 1 only.

Monetary Policy Committee (MPC) - 

  • It decides the RBI's benchmark interest rates.
  • These interest rates include MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility. So Statement 1 is correct.
  • The committee will have six members. So Statement 2 is incorrect.
  • Out of the six members, the government will nominate three members.
  • The other three members would be from the RBI.
  • The Governor of the RBI is the ex-officio Chairperson of MPC. So Statement 3 is incorrect.
  • Members of the Monetary Policy Committee will be appointed for a period of four years.
  • Members of the Monetary Policy Committee shall not be eligible for reappointment.

Other facts - 

  • Each member has a vote.
  • The governor has a casting vote in case of a tie.
  • The governor did not enjoy a veto power to overrule the other panel members.
  • The Reserve Bank of India Act 1934 empowers the RBI to make the monetary policy.

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