Informist, Thursday, Oct 27, 2022

MUMBAI – The Monetary Policy Committee will hold an additional meeting on Thursday, according to a press release issued by the Reserve Bank of India today.

The meeting will be held under provision of Section 45ZN of the Reserve Bank of India Act, 1934, which pertains to drafting the committee's report to the government on failure to meet the inflation targetting mandate.

The Last Time The Committee Met Outside The Scheduled Six Meetings Was In May, When The Repo Rate Was Hiked By 40 Basis Points On May 4

According to the schedule released on Mar 30, the six-member Monetary Policy Committee was scheduled to meet six times in 2022-23 (Apr-Mar). The last meeting was held on Sep 28-30, and the next meet was scheduled on Dec 5-7.

The Section 45ZN of the RBI Act requires a separate meeting of the Monetary Policy Committee to be scheduled to "discuss and draft the report to be sent to the Central Government" after the central bank fails to meet the inflation mandate.

The report should highlight the reasons for failure to achieve the inflation target, remedial actions proposed to be taken by the bank, and estimate of the time-period by when the inflation target shall be achieved, according to the RBI Act.

The central bank is deemed to have failed when average inflation is outside the 2-6% tolerance range for three straight quarters. The RBI failed in its inflation mandate as CPI inflation averaged 6.3% in Jan-Mar, 7.3% in Apr-Jun, and 7.0% in Jul-Sep.

The report has to be sent to the government within one month from the date on which the central bank has failed to meet the inflation target. In this case, the deadline would be Nov 12, one month since the latest inflation print which confirmed the committee's failure to meet its mandate.

"The additional MPC meeting on Nov 03 will be to discuss the response to be sent to government," a source said.

At the outcome of the last policy review in September, RBI Governor Shaktikanta Das had said that the committee would meet again to discuss the central bank's failure on inflation-targetting mandate, in line with legal provisions.

Das, however, declined to share details of what the RBI would discuss ahead of the Monetary Policy Committee's deliberations at that time.

"From our side, we will not make it public because it is a privileged communication from the central bank to the government," Das had said at the time.

The last time the committee met outside the scheduled six meetings was in May, when the repo rate was hiked by 40 basis points on May 4.  End

Reported by Alekh Angre and Shubham Rana

Edited by Ashish Shirke

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