Monetary Policy Committee | Bank Board Bureau

Monetary Policy Committee is a statutory body setup under RBI Act,1934 whose responsibility is to fix the benchmark policy rate or Repo Rate and contain the inflation within a specified target range. The Monetary Policy Committee comprises of 6 members - 3 from RBI and 3 from Central Government with RBI Governor as the chairperson of MPC.  

Bank Board Bureau is an autonomous body of 7 members which was setup on the recommendations of P.J.Nayak Committee (2014) as part of 7-point Indradhanush Mission to revamp the Public Sector Banks. The Bank Board Bureau has the responsibility of appointing the heads of Financial Institutions and PSBs and help the banks to deal with bad loans.

Monetary Policy Committee

1) The Monetary Policy Committee has been constituted under the RBI Act, 1934 as a statutory institutionalized framework for maintaining price stability while keeping in mind the objective of growth.

2) The Monetary Policy Committee has been given the responsibility of of fixing the benchmark policy rate (REPO RATE) which is required to contain inflation within a specified target level (4%).

3) The Monetary Policy Committee comprises of 6 members:

a) Three members from RBI :

• Governor of RBI = Chairperson of Monetary Policy Committee
• Deputy Governor of RBI, who is in-charge of Monetary Policy
• One officer of RBI appointed by Central Board

b) Three members of MPC will be appointed by the Central Government whose term will be 4 years.

4) The meeting of Monetary Policy Committee should be held atleast four times a year and the committee should publish its decision after each meeting.

5) If there occurs a tie between YES and NO between the members of the committee, the RBI governor who is the chairman of MPC gets a deciding vote.

6) The government sets Inflation Target in consultation with RBI once every 5 years.

Current  Inflation Target = 4%

• Upper Tolerance level = 6%
• Lower Tolerance Level = 2%

Bank Board Bureau

1) Bank Board Bureau was set up as an autonomous body in April 2016 as a part of 7-point Indradhanush Mission on the recommendations of P.J Nayak Committee(2014), which aims to improve the governance of Public Sector Banks(PSB's). 

2) The Bank Board Bureau is a super authority comprising of eminent professionals and officials of public sector banks (PSBs). It will recommend for the selection of heads of Public Sector Banks and Financial Institutions, and help banks in developing strategies and capital raising plans.

3) Bank Board Bureau has replaced the Appointments Board of Government.

4) Composition of Bank Board Bureau:

The Bank Board Bureau comprises of 7 members:

a) Chairman

b) 3 ex-officio members 

c) 3 expert members

The Former Comptroller and Auditor General (CAG) Vinod Rai was the first Chairman of Bank Board Bureau.

5) What are the functions of Bank Board Bureau? 

The Bank Board Bureau has following functions:

a) It give recommendations to Government for appointment of full-time Directors as well as non-Executive Chairman of PSBs.

b) It gives advice to Public Sector Banks in developing strategies for raising funds through innovative financial methods and instruments to deal with stressed assets. 

c) Guide banks on mergers and consolidations and also ways to address the bad loans problem and among other issues.

6) The Bank Board Bureau (BBB) has recommended that Government should bring in reforms in the compensation process in public sector banks (PSBs) on the lines of Central Public Sector Enterprises (CPSEs).

It will play important role in attracting high-quality talent for non-executive directors and chairmen. It will also maintain a level-playing field with the private sector with respect to role, responsibility and remuneration.

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