Definition
Monetary Policy Committee (MPC)
The Monetary Policy Committee is the RBI body that sets the policy interest rate to achieve the government-mandated inflation target.
The MPC is a six-member committee, with members from the RBI and external experts appointed by the government, that decides the repo rate by majority vote. It operates under a flexible inflation-targeting framework, aiming to keep consumer inflation around a target with a tolerance band.
By anchoring rate decisions to a transparent, committee-based process with published minutes, the MPC strengthened the credibility of Indian monetary policy. Its decisions ripple through borrowing costs, bond yields and the cost of government market borrowing.
Related terms
- Market Borrowing (Dated Securities)Market borrowing is the money the government raises by issuing dated securities — long-term bonds — to investors to finance its fiscal deficit.
- Reserve Bank of India (RBI)The RBI is India's central bank and monetary authority, responsible for issuing currency, setting policy rates, regulating banks and managing the government's debt.
- Bond Yield and Government BorrowingThe yield on government bonds reflects the cost at which the government borrows and is influenced by the size of its borrowing programme, inflation and RBI policy.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.