Budget 2016: Government to amend RBI Act to set up Monetary Policy Committee

NEW DELHI: The government today proposed to amend the RBI Act for setting up of a Monetary Policy Committee (MPC) which will fix the benchmark interest rate of the central bank and set inflation targets.

"The RBI Act 1934, is being amended to provide statutory basis for a Monetary Policy Framework and a Monetary Policy Committee through the Finance Bill 2016," Finance Minister Arun Jaitley said while unveiling the Budget for 2016-17 in the Lok Sabha.

"A committee-based approach will add lot of value and transparency to monetary policy decisions," he said.

Highlighting that a vibrant financial sector is of critical importance to the growth of every economy, he said, a Financial Data Management Centre under the aegis of the Financial Stability Development Council (FSDC) will be set up to facilitate integrated data aggregation and analysis in the financial sector.

To tackle the problem of stressed assets in the banking sector, Jaitley said Asset Reconstruction Companies (ARCs) have a very important role.

"I therefore, propose to make necessary amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100 per cent stake in the ARC and permit non-institutional investors to invest in Securitisation Receipts," he said.

The government last year had proposed to set up the MPC, which will consist of representatives from the Finance Ministry and RBI, to decide on interest rate.