The Centre on Thursday appointed three academics as members of the new Monetary Policy Committee, which will decide the Reserve Bank of India's benchmark interest rates. Indian Statistical Institute professor Chetan Ghate, Director of the Delhi School of Economics Pami Dua and Indian Institute of Management-Ahmedabad professor Ravindra H Dholakia will be part of the panel headed by RBI Governor Urjit Patel.

According to a notice issued by the government, the Appointments Committee of the Cabinet cleared the three experts as MPC members for four years. The central bank's representatives in the committee include the governor, a deputy governor and another nominee from the RBI.

The setting up of the policy panel marks a start change from the earlier system of the RBI governor having the authority to make the final decision on the institution's interest rates, regardless of the recommendations from the existing Technical Advisory Committee. The MPC's objective is to review the RBI's interest rates to keep retail inflation within the 4% mark.

A senior official of the Finance Ministry said the Centre wanted its nominees to "have an arm's length distance" from the government to "set a healthy precedent". Ghate was part of the advisory committee that provided guidance on interest rates to the RBI governor before every monetary policy review. The RBI's fourth bi-monthly policy review for 2016-'17 is on October 4.

The MPC was set up with an amendment to the Reserve Bank of India Act, 1934, through the Finance Act 2016. Each member will have a vote, while the RBI governor will have casting vote in case of a tie. MPC members are not eligible for reappointment to the committee.