Frequency of Monetary Policy Announcements of RBI

Given below are some materials relating to the discussion we had in the class regarding frequency of
monetary policy announcements.

The students were right in saying that the announcement is made once in two months. This has
been the practice since 2014.

But there is a law that governs the RBI. This law states that it is necessary to have monetary policy
reviews only for a minimum of 4 times in a year. This means that the official requirement is
quarterly but the authorities in RBI have the powers to change the frequency as they wish. This is
the latest position as per law (amended from 2016).

You will also notice that the monetary policy used to be announced only twice a year much earlier
and then it became quarterly and for some time RBI made mid-quarterly announcements also. Then
it was changed to bimonthly basis from 2014.

So, the current practice is bi-monthly but this can change anytime depending on the exigencies in
the economy. But the basic rule is minimum of 4 times a year.

Hope that the position is clear now. If you still have any doubts, we can discuss during the next class.

References

Extract from https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RBIA1934170510.PDF

(see page 90 of 114)

Section 45ZI of the RBI Act, 1934 states :

(1) The Bank shall organise at least four meetings of the Monetary Policy Committee in a year.
(2) The meeting schedule of the Monetary Policy Committee for a year shall be published by the Bank at least one
week before the first meeting in that year.
(3) The meeting schedule may be changed only––
(a) by way of a decision taken at a prior meeting of the Monetary Policy
Committee; or
(b) if, in the opinion of the Governor, an additional meeting is required or
a meeting is required to be rescheduled due to administrative exigencies.
(4) Any change in meeting schedule shall be published by the Bank as soon as
practicable.

From https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=39913

Meeting Schedule of the Monetary Policy Committee for 2017-18

As per Section 45ZI (1) and (2) of Reserve Bank of India Act, 1934, the Reserve Bank shall
organize at least four meetings of the Monetary Policy Committee in a year and the meeting
schedule of the Monetary Policy Committee for a year shall be published at least one week
before the first meeting in that year.

Accordingly, it has been decided that the Monetary Policy Committee will meet six times
during 2017-18 as indicated below:
 First Bi-monthly Monetary Policy
: April 5 and 6, 2017
Statement for 2017-18
Second Bi-monthly Monetary Policy
: June 6 and 7, 2017
Statement for 2017-18
Third Bi-monthly Monetary Policy
: August 1 and 2, 2017
Statement for 2017-18
Fourth Bi-monthly Monetary Policy
: October 3 and 4, 2017
Statement for 2017-18
Fifth Bi-monthly Monetary Policy
: December 5 and 6, 2017
Statement for 2017-18
Sixth Bi-monthly Monetary Policy
: February 6 and 7, 2018
Statement for 2017-18

Jose J. Kattoor
Chief General Manager

Press Release: 2016-2017/2533

From https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=43436

Meeting Schedule of the Monetary Policy Committee for 2018-19

As per Section 45ZI (1) and (2) of Reserve Bank of India Act, 1934, the Reserve Bank shall
organize at least four meetings of the Monetary Policy Committee in a year and the meeting
schedule of the Monetary Policy Committee for a year shall be published at least one week
before the first meeting in that year.

Accordingly, it has been decided that the Monetary Policy Committee will meet six times
during 2018-19 as indicated below:

First Bi-monthly Monetary Policy

: April 4 and 5, 2018
Statement for 2018-19
Second Bi-monthly Monetary Policy
: June 5 and 6, 2018
Statement for 2018-19
Third Bi-monthly Monetary Policy July 31 and August
:
Statement for 2018-19 1, 2018
Fourth Bi-monthly Monetary Policy October 3 and 4,
:
Statement for 2018-19 2018
Fifth Bi-monthly Monetary Policy December 4 and 5,
:
Statement for 2018-19 2018
Sixth Bi-monthly Monetary Policy February 5 and 6,
:
Statement for 2018-19 2019

Jose J. Kattoor
Chief General Manager

Press Release: 2017-2018/2504

http://www.morningstar.in/posts/34097/5-things-to-note-about-monetary-policy.aspx

The RBI used to announce its monetary policy twice in a financial year. The financial year starts on
April 1 and ends on March 31 the following year. After Bimal Jalan took charge as governor in 1997,
he moved from two monetary policy reviews in a year to quarterly reviews. His successor Y V Reddy
introduced a mid-quarter review, which resulted in an announcement every 45 days. A panel headed
by RBI deputy governor Urjit Patel had recommended that the central bank monetary policy
committee conduct a bi-monthly review. So while the RBI reviews its stance once in two months, it
has the leeway to make changes to policy between the reviews if necessary.

https://timesofindia.indiatimes.com/business/india-business/RBI-shifts-to-bi-monthly-policy-
review/articleshow/31867229.cms

RBI shifts to bi-monthly policy review

TNN | Mar 12, 2014, 06:42 IST
MUMBAI: The Reserve Bank of India will shift to a system of announcing its policy
statement bi-monthly with the first such policy being announced on April 1, 2014. Bankers
widely expect RBI to hold on to rates given that pressure on inflation is easing and the rupee
has also been firming up.

Until the mid-90s, RBI had only two monetary policy reviews a year.

After Bimal Jalan took charge as governor in 1997, he rechristened the process as monetary
policy and introduced quarterly reviews. His successor Y V Reddy introduced a mid-quarter
review, which resulted in an announcement every 45 days.

A panel headed by RBI deputy governor Urjit Patel had recommended that the central bank
monetary policy committee meet every two months to review rates.