NEW DELHI (TIP): After months of debate, the finance ministry and the Reserve Bank of India seem to be converging on the proposed monetary policy committee (MPC), which will have equal representation from both sides, with the governor having the deciding vote on interest rates.

Sources said the plan is to have a six-member panel — with three members being nominated by the government and an equal number coming from RBI.

While the RBI governor will have the casting vote, the deputy governor and executive director dealing with monetary policy will be the members.

In case of the government nominees, the finance ministry will decide on who would be nominated.

The move to form a monetary policy committee (MPC), with the RBI governor having the deciding vote on interest rates, is set to be endorsed by the cabinet. It comes after a bitter debate over the constitution of the committee that will replace the existing system where the RBI is the sole authority on interest rates although the governor consults a technical committee.

Under the new mechanism — a part of which has already been implemented —the Centre and the central bank would agree to an inflation target and RBI would then move the policy rates accordingly based on the recommendations of the proposed monetary policy committee. Currently, the target is 4% inflation with a possible movement of 2% either way.

There have been various suggestions on how the committee should be structured. The Financial Sector Legislative Reforms Commission had suggested a seven-member committee with the governor as the chairman, an RBI executive director, three members from the government and two to be jointly decided by the Centre and RBI.

Then, a committee headed by RBI deputy governor Urjit Patel had recommended a five member panel with three central bank officials and two two external members, who were to be appointed by the governor and D-G. The governor was to get a casting vote in case of a tie.

A few months ago, a draft report was put out on the finance ministry website which suggested a seven-member committee with four members to be nominated by the government and three coming from RBI, with the governor getting a casting vote. The report was widely criticized and the government said that it was not its draft.