Should MPC vote on stance?

The last two monetary policy statements, in April and June, reflect some critical fine-tuning under the new chairperson, Sanjay Malhotra.

- RENU KOHLI

One, the bullet on monetary policy stance under the sub-head "Monetary Policy Decisions" has been dropped. The words "the decision" make a comeback in the text, replacing its plural "these decisions" as seen in the February statement. The new-look statement places this in the last section, "Rationale for Monetary Policy Decisions", although it isn't part of the "Decisions". Two, there's no mention if the Monetary Policy Committee (MPC) members voted on the stance. The MPC meeting's minutes revealed the stance was no more part of the monetary policy "resolution", and therefore, of the operational framework. Accordingly, members did not vote on "stance" although they continued "extensive discussion" and submitted views in writing.

These changes are substantive and convey the impression that "stance" has been relegated to a lower pedestal as a lever to achieve the medium-term inflation target.

Chairperson's discretion What is the legal basis for such critical changes? The Reserve Bank of India (RBI) Act, 1934, does not mention "stance" anywhere. Section 45ZI (10) requires MPC members to vote for a proposed "resolution", 45ZI (11) to specify reasons. Though the Act does not specify what "resolution" should include, 45ZB (3) mandates the MPC to determine the policy rate, implying this certainly be a part. It is the rules, Section 5(i)d of the RBI Monetary Policy Committee and Monetary Policy Process Regulations, 2016, that state the resolution shall include the policy repo rate, and at the discretion of chairperson, any other monetary policy measures including those relating to the operating framework of monetary policy.