Reserve Bank Governor Urjit Patel today met Finance Minister Arun Jaitley ahead of India’s first collective interest-rate decision on Tuesday.
The October 4 monetary policy review will be the first under Patel and by the all-powerful interest-rate setting panel, whose constitution was notified by the government today.
Patel, who took over as the RBI Governor from Raghuram Rajan on September 4, did not offer any comment on his meeting with Jaitley but it is said to be a customary pre-monetary policy meeting where macro-economic developments would have been discussed.
Soon after his meeting, the Finance Ministry issued an order notifying the six-member Monetary Policy Committee (MPC) headed by the Reserve Bank Governor.
The government had last week named three academics to join Patel, his deputy in charge of monetary policy and another central bank executive on the new MPC.
Indian Statistical Institute Professor Chetan Ghate, Delhi School of Economics Director Pami Dua and IIM-Ahmedabad Professor Ravindra Dholakia as also three RBI nominees will have one vote each.
In case of a tie, Patel will have a casting vote in deciding on the interest rate as guided by a newly established inflation target. He, however, would not be able to veto a majority decision.
While the previous RBI Governor Rajan was often accused of keeping borrowing costs too high and hurting growth, the MPC will be guided by the inflation target set by the government last month. It has to ensure that consumer inflation stays within 2 to 6 per cent.
October 4 will be the first monetary policy review after appointment of Patel as head of the 81-year-old central bank.
There are expectations that Patel will go for cut in interest rate on easing inflation. The Reserve Bank has reduced interest rate by 150 basis points since January 2015 with an aim to boost economic growth.