Monetary Policy Committee & PJ Nayak Committee & Their Objectives

Are you preparing for government exams and always looking for informative and interesting topics to read on the internet? Well, you have come to the right place then as here we get you the most informative and important issues from different subjects. As you might have read from the article already that today’s topic will cover two most important cases, the Monetary Policy Committee (MPC) and PJ Nayak Committee. We will begin by learning about the Monetary Policy Committee and then move ahead to learn about the P J Nayak Committee. Make sure that you go through the article thoroughly to not miss out on any piece of information. Now, without any further ado let’s start the reading.

What Is The Monetary Policy Committee (MPC) & Its Objectives?

India’s monetary policy is the procedure of controlling the supply of money in the economy by the monetary authority of our nation. The policy commonly modifies the inflation rates or interest rates to keep price steadiness and to uphold predictable exchange rates with foreign money. All the main judgments relating to interest rates were initially taken by the governor of RBI alone till the Central Government formed the Monetary Policy Committee (MPC) led by the Governor of RBI. 

It was the Urijit Patel Committee that first suggested the construction of a five-member Monetary Policy Committee. Subsequently, the government suggested establishing a seven-member committee. MPC was formed under the Reserve Bank of India Act, 1934 with an ambition to bring more clarity and accountability to improving the Monetary Policy of India. Finally, the Monetary Policy Committee came into power on 27th June 2016.  

The governor of the RBI manages the monetary policy judgments with the consent and suggestions of the internal team and the technical advisory committee. MPC is aided by the Monetary Policy Department (MPD) of the Reserve Bank in the formulation of the policy.  The Financial Markets Operations Department (FMOD) operationalizes the monetary policy, mainly through day-to-day liquidity management operations.MPC executes its meetings at least 4 times a year and the monetary policy is issued after every meeting with each member presenting their opinions. Recently, the 29th conference of the Monetary Policy Committee (MPC) was carried out from June 2 to 4, 2021.

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What Is The PJ Nayak Committee & Its Objectives?

In nationalized banks, the government of India owns a share percentage of more than 50%, which gives it majority voting rights. Because of this, the government can meddle in the panels of such banks and designate inefficient people to the boards. This leads to overall inefficiency and deceptions.

To keep a check on these wrongdoings PJ Nayak who is the retired CEO and Chairman of Axis Bank and who also held the position of joint secretary in the Department of Economic Affairs directed a committee on Banking Reforms known to be the PJ Nayak Committee. The committee is also known as the Committee to Review Governance of Boards of Banks in India. It was established by the Reserve Bank of India (RBI) in January 2014 to examine the management of the board of banks in India. 

The PJ Nayak Committee is responsible to check the workings of the boards of banks and their strategy issues, governance, growth, and risk management. It examines the regulatory guidelines of RBI on bank ownership, ownership concentration, and board concentration. It also checks whether the needed mix of capabilities, independence to govern, and possible conflict of interest in board representation. Further, it studies any other matters relevant to the functioning and governance of the boards of banks.

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