Sources from New Delhi have stated that government today has enforced a law for setting up a broad-based, 6 member committee that is likely to decide on interest rate at the next monetary policy in August, with RBI Governor having a casting vote in case of a tie.
It is said that under the current system, the Governor has overriding powers to accept or reject the recommendation of the Reserve Bank of India's panel on monetary policy and the government has kicked-off the process of setting up a Monetary Policy Committee (MPC), which will take over the job of interest rate setting from the central bank.
As per the statement the Rules governing the Procedure for Selection of Members of Monetary Policy Committee and Terms and Conditions of their Appointment and factors constituting failure to meet inflation target under the MPC Framework have also been notified on June 27, 2016.
Every six months, RBI will publish the Monetary Policy Report explaining sources of inflation and its forecast for 6-18 months and in case if RBI for some reason fails to meet inflation target, remedial actions as well as estimated time within which the target will be achieved.
