The Government on Monday initiated the process of setting up new monetary policy committee (MPC) under the Reserve Bank of India Act, 1934, which has been amended by the Finance Act 2016.

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On Monday, the government notified that to maintain transparency to monetary policy decisions, a committee of six people will be set up.

In a tweet, Reuters said, that Prime Minister Narendra Modi is keen to select MPC's members with inputs from RBI Governor Raghuram Rajan, who has decided not to continue with the second term of his post.

"Out of the six Members of MPC, three Members will be from the Reserve Bank of India (RBI), including the Governor, who will be the ex-officio Chairperson, the Deputy Governor, RBI and one officer of RBI. The other three Members of MPC will be appointed by the Central Government, on the recommendations of a Search-cum-Selection Committee, which will be headed by the Cabinet Secretary".

As per the notification, the members of MPC will be appointed for a period of four years and will not be eligible for re-appointment.

The member of MPC will meet four times a year and it will publicise its decision, said the government release.

"Under the changes, passed by parliament last month, a six-member monetary policy council will set interest rates by majority, with a casting vote for the central bank governor in the event of a tie", the notification added.

(With Reuters inputs)