Earlier, the 'RBI' meant only the Governor and it is only since the last four years that we got to see how the members work. The Monetary Policy Committee (MPC), along with the Governor is what we see as a public face for policy action by the RBI today.

And this 6-member MPC is to be rejigged again. Given the pandemic, to maintain continuity, the RBI had asked the Govt for an extension of the same MPC members to continue but the Govt rejected that request as legally this is not permitted. Now the hunt is on for three members.

Of the 6, one is the Governor himself, Shaktikanta Das. And of the 5 – three are external representatives and they are appointed by the Govt for a fixed tenure of four years. So, the three members whose tenure ends on 30^th September are - Dr. Ravindra H. Dholakia, Professor at IIM Ahmedabad, Professor Pami Dua, Director, Delhi School of Economics and Chetan Ghate, Professor at Indian Statistical Institute.

A fourth head hunt is also on – Janak Raj, Executive director of the Bank in charge of monetary policy, retired in June. Mridul K. Saggar filled this seat as executive director in charge of the monetary policy department and this makes him the automatic choice as a member of the MPC. But apparently, as per the bureaucratic machine, he needs to be nominated by the Central Board. Maybe this is a good time to make it an ex-officio position – after all this is also part of the maximum governance – minimum governance promise isn’t it?

Interestingly, the three members from the RBI, excluding the Governor have constantly been fluid and it is only these three external members, along with Das, who have been present for every single meet of the MPC for the past four years.  R.Gandhi was appointed before the appointment of Viral Acharya and B.P. Kanungo was appointed after Acharya’s resignation.

What is the meaning of the MPC if members are appointed temporarily? If RBI Act does not state that all 6 members need to be present for the MPC, specifying the quorum at 4, why this constant turnaround in the two RBI-appointed posts? If RBI is not certain, instead of just filling in a seat temporarily, it could wait out and look for the right candidate within, with the right expertise and experience in monetary policy. Maybe this is another facet of the MPC membership that needs to be looked into.

RBI deputy governor Michael Debabrata Patra is the sixth member of the interest rate-setting panel. The MPC is mandated to set its monetary policy in a manner that consumer prices stay between 2% and 6%.

These three external members are nominated by the Govt and the news is that a selection panel, headed by Cabinet secretary Rajiv Gauba, including Shaktikanta Das, Economic Affairs Secretary Tarun Bajaj, Niti Aayog vice-chairman Rajiv Kumar and Urjit Patel has been roped in to pick the best for the MPC members.

This change could be a great opportunity to make this MPC more diverse, bring in more voices from different facets of the economy. The current external MPC members are all renowned academicians but were they the true representatives of what was actually happening on the ground? When there is no “rule” that all the external members need to be professors, why not a member from India Inc, or say someone from a commercial bank itself or someone who represents the needs of the common man too?

And as one economist rightly said, why not a learned economist who brings in his own forecast model and does not depend on the RBI model alone? Wont that give a more divergent view, a richer debate on the decisions made? Just toeing the line of the Governor or going by the majority mandate is not enough.

Indeed, it will be very interesting to see who the three new external members will be. And hopefully, they will have the wherewithal to guide the country through perhaps what can be called its most difficult time.