Section 45ZB of the RBI Act and the six-member committee that fixes the policy repo rate

Background

The Reserve Bank has been in the news through this week for liquidity and foreign exchange measures; the rate those measures work around is fixed by a statutory committee.
The Reserve Bank of India Act, 1934 was amended in 2016 to give a statutory basis to the flexible inflation targeting framework.
Under Section 45ZA the Central Government, in consultation with the Reserve Bank, determines the inflation target in terms of the Consumer Price Index once in five years and notifies it in the Official Gazette.
The target is 4 per cent CPI inflation, with an upper tolerance limit of 6 per cent and a lower tolerance limit of 2 per cent.
Section 45ZB provides for a six-member Monetary Policy Committee, constituted by the Central Government by notification in the Official Gazette, to determine the policy repo rate required to achieve that target.
The Governor of the Reserve Bank is its ex officio Chairperson; the Deputy Governor in charge of monetary policy and one officer of the Reserve Bank nominated by the Central Board are the other ex officio members, and three members are appointed from outside for a period of four years.
The committee must meet at least four times a year, the quorum is four members, each member has one vote, and in the event of an equality of votes the Governor has a second or casting vote.
The operating target is the weighted average call rate, which the Reserve Bank aligns with the policy repo rate through liquidity management.