Monetary Policy Committee (MPC) is a key decision-making body within the Reserve Bank of India (RBI) responsible for formulating the country's monetary policy. Its main objective is to maintain price stability while supporting economic growth. The MPC determines the policy repo rate ó the rate at which the RBI lends money to commercial banks ó which directly influences interest rates, borrowing costs, and overall liquidity in the economy.

The MPC was established under the RBI Act, 1934 (amended in 2016) to bring transparency and accountability in interest rate decisions. The committee comprises six members: three from the RBI (including the Governor as the Chairperson) and three external members appointed by the Government of India. Each member has one vote, and in case of a tie, the Governor has the casting vote. This structure ensures a balanced approach between central bank expertise and independent external perspectives.

The MPC meets at least four times a year, and its decisions are published along with a statement explaining the rationale behind rate changes or status quo. These policy announcements impact inflation, credit growth, investment sentiment, and currency stability. For instance, a rate hike helps control inflation, while a rate cut encourages borrowing and economic activity.

In Indiaís inflation-targeting framework, the MPC aims to keep inflation at 4% with a tolerance band of ±2%. This approach helps anchor inflation expectations and provides clarity to investors, businesses, and consumers. Overall, the Monetary Policy Committee plays a vital role in guiding Indiaís macroeconomic stability by balancing inflation control with growth support through its evidence-based and transparent decision-making process.