Government, RBI agree on composition of monetary policy committee structure

RBI Governor Raghuram Rajan on Thursday said the government and the central bank have agreed on composition of the interest rate-setting monetary policy committee (MPC).

"MPC agreement has been largely done. Only fine-tuning is left. The government and RBI are broadly on the same page on composition of MPC," Rajan told reporters here.

The government has proposed to set up MPC, which will consist of representatives from the Finance Ministry and RBI, to decide on interest rate.

Rajan said the final call on the timing of implementing MPC will be taken by the Finance Ministry.

The revised draft of the Indian Financial Code (IFC), released by the ministry in July, had suggested doing away with RBI Governor's veto power and proposed a 7-member MPC to take rate decisions by a majority vote.

Of the seven members, four are proposed to be government nominees and the rest from RBI.

Under the current set-up, the government appoints RBI Governor, who controls the monetary policy and has veto power over the existing advisory committee of RBI members and outside appointees that sets rates.