Economic Affairs Secretary Shaktikanta Das has said that the Finance Ministry and Reserve Bank of India (RBI) are broadly on the same page and working in close cooperation on composition of a Monetary Policy Committee (MPC). He said that “we always hold frequent discussions between the Finance Ministry and Reserve Bank of India for setting up Monetary Policy Committee “.
MPC will fix the benchmark interest rate of the RBI and set inflation target. The MPC will consist of representatives from the Finance Ministry and RBI, to decide on interest rate. The agreement was signed after a committee headed by Deputy Governor Urjit Patel recommended a shift to this practice. RBI joined a growing list of central banks in the world with inflation targeting as an explicit objective by signing an agreement with the government last February.
Recently, RBI governor Raghuram Rajan said that the central bank has finished negotiations with the Finance Ministry on the issue of the MPC. He also added that the work is completed. Further Rajan had said that now the government has to decide on the timing of tabling the amendments to the RBI Act before Parliament.