The Reserve Bank of India Governor Shaktikanta Das announced that the RBI is reviewing the retail inflation targeting framework behind the monetary policy decision. The effectiveness of the framework, as well as plans to hold stakeholders consultations with the government, will also be discussed in June. "The monetary policy framework is in operation for three and a half years. We have initiated a process of an internal review of how the monetary policy framework has worked," Das told news agency PTI in an interview.
Back in 2016, the Government had asked the RBI set up a Monetary Policy Committee headed by RBI Governor which was to deal with keeping the inflation under a specified level and fix a benchmark policy rate (repo rate). The panel had held its first meeting in October 2016 and had given the mandate to maintain annual inflation at 4 per cent until March 31, 2021.
The RBI Governor announced that they had commenced an internal review of the working of the monetary policy framework, and will be holding a round table with analysts and experts and other stakeholders for further consultations. Obviously, RBI has to interact with the government because the framework is a part of the law, he said, adding, "so, naturally government has to take a view."
With regard to monetary policy transmission, Governor Das stated that it was steadily improving. "If you see it was 49 basis points transmission for new loans in the December MPC. In February MPC, it has gone up to 69 basis points. So it is steadily improving," he said.