Arun jaitley
India's Finance Minister Arun Jaitley speaks at an Economist conference in New Delhi, India, Sept. 9 2015 [Representational Image].Reuters

Finance Minister Arun Jaitley on Friday expressed hope that the Reserve Bank of India (RBI) will keep in view the declining retail inflation while deciding on the interest rates at the next policy review meeting, which is scheduled on October 4.

He said India's central bank was a responsible organisation. "I expect when the policy review takes place next month, RBI, and hopefully if MPC is constituted by then, they will collectively keep all these factors in mind," he said when asked if declining inflation leaves room for rate cut, Press Trust of India reported.

During the last policy review meeting held in first week of August, the RBI (headed by former governor Raghuram Rajan) left key policy rates unchanged citing inflation.

The retail inflation declined to a five-month low of 5.05 percent in August.

In July, the central government had set the inflation target at four percent over the next five years on the basis of which, the monetary policy committee would take a final decision, PTI added. The MPC headed by new RBI governor Urjit Patel will also provide a margin of plus or minus two percent in this target, thus fixing the upper level at six percent until 2021.

The members, to be appointed by the government soon, will include the RBI governor, two other central bank employees and three external members. The decision on policy rates cuts will be taken by the majority of the panel, and the RBI governor would have an extra vote in case of a tie. The government is already in the process of appointing the three external members of the MPC.

The parliament approved the new monetary policy frame-work earlier this year. The outgoing central bank head, Raghuram Rajan, whose stint ended on Sept. 4, was the last RBI governor to take an independent decision on the rate cut policy. The decisions whether to cut the policy rates or not will be taken by the majority of the panel, even though the RBI governor would have an extra vote (in case of tie).

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