Monetary Policy of RBI MBA - 2018-2019 StudyChaCha

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Old July 7th, 2017, 05:41 PM
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Default Monetary Policy of RBI MBA

Recently I have completed MBA Degree. I want to start preparation for job in RBI. So I want to know about Monetary Policy. So someone is here who will tell me about Monetary Policy of RBI?
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Old July 7th, 2017, 05:45 PM
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Default Re: Monetary Policy of RBI MBA

Here I am providing information about Monetary Policy of Reserve Bank of India (RBI):


Goal(s) of monetary policy:

The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.

In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.

The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years.

Monetary Policy Framework
The amended RBI Act explicitly provides the legislative mandate to the Reserve Bank to operate the monetary policy framework of the country.

The framework aims at setting the policy (repo) rate based on an assessment of the current and evolving macroeconomic situation; and modulation of liquidity conditions to anchor money market rates at or around the repo rate.

The operating framework is fine-tuned and revised depending on the evolving financial market and monetary conditions, while ensuring consistency with the monetary policy stance.

The Monetary Policy Process:

Section 45ZB of the amended RBI Act, 1934 also provides for an empowered six-member monetary policy committee (MPC) to be constituted by the Central Government by notification in the Official Gazette. Accordingly, the Central Government in September 2016 constituted the MPC as under:
1. Governor of the Reserve Bank of India Chairperson, ex officio;
2. Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy Member, ex officio;
3. One officer of the Reserve Bank of India to be nominated by the Central Board Member, ex officio;
4. Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI) Member;
5. Professor Pami Dua, Director, Delhi School of Economics Member; and
6. Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad Member.

Open and Transparent Monetary Policy Making

Under the amended RBI Act, the monetary policy making is as under:
The MPC is required to meet at least four times in a year.
The quorum for the meeting of the MPC is four members.
Each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote.
The resolution adopted by the MPC is published after conclusion of every meeting of the MPC in accordance with the provisions of Chapter III F of the Reserve Bank of India Act, 1934.
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