QUESTION

Medium

Economy

Prelims 2017

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 :

Select an option to attempt

Explanation

Statement 1 is Correct: The Monetary Policy Committee (MPC) does decide the RBI's benchmark interest rates. This is its primary function, and it influences the cost of borrowing and lending in the economy.

Statement 2 is Incorrect: The MPC is a 6-member body, not 12. It includes the Governor of RBI and other members appointed by the government. The committee is not reconstituted every year, but members serve for specified terms.

Statement 3 is Incorrect: The MPC functions under the chairmanship of the Governor of RBI, not the Union Finance Minister.

Therefore, the correct answer is 1 only.Hence, option A is the correct answer.

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