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 code given below: 

[UPSC Civil Services Exam – 2017 Prelims]

(a) 1 only

(b) 1 and 2 only

(c) 3 only

(d) 2 and 3 only

Answer: (a)        

Explanation:

• The Monetary Policy Committee (MPC) is responsible for determining the benchmark interest rates of the Reserve Bank of India (RBI). These interest rates, which encompass the Marginal Standing Facility (MSF), Repo Rate, Reverse Repo Rate, and Liquidity Adjustment Facility, are decided by the MPC. Therefore, Statement 1 is accurate.
• Contrary to Statement 2, the MPC consists of a total of six members. Among these members, the government nominates three, while the remaining three are chosen from the RBI. Thus, Statement 2 is incorrect.
• Additionally, the Governor of the RBI serves as the ex-officio Chairperson of the MPC. Hence, Statement 3 is incorrect.
• The members of the Monetary Policy Committee are appointed for a term of four years and are not eligible for reappointment.