UPSC Prelims 2017 – Question 11

Here is Question No. 11 a part of our series on UPSC Prelims 2017

Q11. 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 codes given below.
a) 1 only
b) 1 and 2 only
c) 3 only
d) 2 and 3 only

The correct answer is 1 only. 

• Monetary Policy Committee (MPC) 
• The RBI’s benchmark interest rates, which include MSF, Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility, are determined by the Monetary Policy Committee (MPC). Hence, Statement 2 is correct. 
• The committee will consist of six people. Hence, Statement 2 is not correct. 
• The government will propose three candidates for each of the six open seats. 
• The RBI’s other three members would be included. 
• Ex-officio Chairperson of MPC is the Governor of the Reserve Bank. Hence, Statement 2 is not correct. 
• Appointments to the Monetary Policy Committee will last for four years. 
• Reappointments to the Monetary Policy Committee are not permitted. 

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