Question

Which of the following best describes the role of the Monetary Policy Committee?

Options

• It decides tax rates to control fiscal deficit

• It sets the benchmark repo rate to keep inflation within the target band

• It fixes the CRR and SLR for all banks

• It regulates the working of cooperative banks only

Answer 1

It sets the benchmark repo rate to keep inflation within the target band

Explanation: 

The MPC is a 6‑member committee of the RBI that decides the benchmark repo rate with the aim of maintaining inflation at 4% with a tolerance band of ±2%.