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The Reserve Bank of India (RBI) on Thursday (October 27) said that it would hold an additional Monetary Policy Committee (MPC) meeting on November 3, 2022. This meeting has been called as the RBI has failed to maintain the consumer price index (CPI) inflation target within the 2-6 per cent band for three consecutive quarters, or nine straight months — January to September 2022.
While making the announcement, the RBI said the meeting is being scheduled under the provisions of Section 45ZN of the Reserve Bank of India (RBI) Act, 1934.
The central bank also referred to Regulation 7 of the RBI Monetary Policy Committee (MPC) and Monetary Policy Process Regulation, 2016.
What does Section 45ZN of the RBI Act say?
This is the first time since the RBI adopted an inflation-targeting monetary policy regime in 2016 that an MPC meeting has been called under the provisions of Section 45ZN of the Act.
This section says that in case the RBI fails to meet the inflation target, it has to present a report to the government explaining the reasons for the failure. In the report, the central bank will have to mention the remedial actions it proposes to take, and an estimated time within which the inflation target will be achieved following the timely implementation of the proposed remedial actions.
And what is the other provision, Regulation 7?
The Regulation 7 of the RBI MPC and Monetary Policy Process Regulations, 2016 states that a separate meeting is required to be scheduled as part of the normal policy process to discuss and draft the report to be sent to the government.
Although the MPC is responsible for maintaining the inflation target, the report will be written by the RBI. However, the MPC will be consulted — and hence, the RBI has scheduled the additional MPC meeting on November 3.
By when does RBI have to send the report?
The report is required to be sent to the government within one month from the date on which the RBI failed to meet the inflation target. In the present case, the September CPI inflation data was released on October 12. So, the RBI has time till November 12 to send the report to the government.
What is the schedule of MPC meetings?
Currently, the MPC meets six times in a financial year, which is every two months. The schedule of the MPC meetings for the entire financial year is announced in advance. At the beginning of this fiscal, the RBI said the MPC would meet from April 6-8, from June 6-8, from August 2-4, from September 28-30, from December 5-7, and from February 6-8, 2023.
As per this schedule, the MPC has already met in April, June, August, and September. However, the MPC held an off-cycle meeting from May 2-4, 2022, in which it raised the repo rate by 40 basis points (bps) for the first time in almost four years.
The coming meeting on November 3 will also be outside the schedule announced at the beginning of the financial year.
