Monetary Policy and Banking — Policy Reforms

Entry	Year	Description	Impact
Finance Act 2016	2016	The Finance Act, 2016 (Act 28 of 2016) amended the Reserve Bank of India Act, 1934 to establish a statutory monetary-policy framework. Chapter III-F took effect on 27 June 2016. Section 45ZA assigns the Central Government, in consultation with RBI, the task of determining a Consumer Price Index inflation target once every five years. Section 45ZB assigns the Monetary Policy Committee the policy-rate decision required to achieve that target and makes its decision binding on RBI.	Keep the target and instrument separate: the government’s notified inflation objective is not the committee’s interest-rate decision. RBI must explain implementation under section 45ZJ, publish the meeting resolution under section 45ZK, and report reasons, proposed remedies and an expected recovery period to the government when the defined target-failure condition is met under section 45ZN. This amendment created the framework; it did not permanently fix an inflation percentage in the Act. A numerical target must be attached to its own notification and validity period.