Answer-The RBI's Monetary Policy Committee (MPC) has a mandate to keep CPI inflation at 4% (with ±2% tolera...

Under Section 45ZN of the amended RBI Act, if the MPC fails to achieve the inflation target i.e., if CPI inflation remains above the upper tolerance band of 6 or below the lower band of 2 for three consecutive quarters the RBI must submit a report to the Union Government. This report must include 1 reasons for the failure 2 remedial measures the RBI proposes to take and 3 the estimated time frame within which inflation is expected to return to target. This creates a structured accountability mechanism without compromising the RBIs operational independence. There are no automatic rate changes, personnel removals, or government directives triggered.

Question

The RBI's Monetary Policy Committee (MP

C has a mandate to keep CPI inflation at 4% (with ±2% tolerance band). If CPI remains above 6% for three consecutive quarters, what consequence is mandated under the RBI Act?

A The Finance Minister can dissolve the MPC and appoint a new committee

B The RBI must submit a report to the Union Government explaining reasons for the failure, remedial actions proposed, and the estimated time frame for returning to target

C MPC members who voted against a rate hike automatically lose their positions

D The repo rate is automatically increased by 50 basis points without an MPC vote

E The RBI must immediately raise CRR by 1 percentage point as a corrective measure

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