RBI defers MPC meet as 3 posts lie vacant

Mumbai: The Reserve Bank on Monday postponed the meeting of the Monetary Policy Committee (MPC), the all-important interest rate-setting panel, over a possible lack of quorum as the appointment of independent members is delayed.

The Reserve Bank in a press release said that the MPC meeting, which was to begin for three days beginning Tuesday for a bi-monthly monetary policy review, has been rescheduled and new dates will be announced shortly.

"The meeting of the Monetary Policy Committee (MPC) during September 29, 30 and October 1, 2020 is being rescheduled. The dates of the MPC's meeting will be announced shortly," the RBI said.

The government moved the interest rate-setting role from the RBI Governor to a six-member MPC in 2016. Half of the panel, headed by the RBI governor, is made up of external independent members. The four-year terms of three external members of MPC ended last month and they are yet to be replaced by the government.

Rules require at last four members to be present at the meeting, with at least one being the Governor or his deputy, who is a member of the committee. It was expected that the MPC would hold interest rates at the upcoming meeting as inflation was still above the comfort zone.

The government in 2016 appointed Chetan Ghate, a professor at Indian Statistical Institute; Pami Dua, director at Delhi School of Economics (DSE); and Ravindra Dholakia, professor at Indian Institute of Management, Ahmedabad, as independent members of the MPC for four years.

The external members can hold office for a period of four years and are not eligible for re-appointment. The other ex-officio members of the MPC are Reserve Bank Governor, Deputy Governor (in-charge of monetary policy) and one RBI officer to be appointed by the central board. The MPC, which must have a quorum of four, cannot meet unless the central government appoints new independent members.

The government earlier this year constituted a search panel headed by the Cabinet Secretary with RBI Governor and Economic Affairs Secretary as members for selecting members of MPC. The six-member panel, which had its first meeting in October 2016, was given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.

The external members of the Monetary Policy Committee are appointed by the Central Government from amongst persons of ability, integrity and standing, having knowledge and experience in the field of economics or banking or finance or monetary policy.

The last meeting of the MPC was held from August 4 to 6, 2020. It was the 24th meeting of the rating setting panel.