New Delhi, May 12 (KNN) The Upper House of the Parliament, on Wednesday, approved a Bill that sets up a panel to decide interest rates. Currently, RBI governor Raghuram Rajan is the sole authority for monetary policy decisions with assistance from a panel that is purely advisory.

Under the new law a six-member monetary policy council will set interest rates by majority, with a casting vote for Rajan in the event of a tie.

Three members will be representatives from the government, and three from the RBI.

Members from the RBI side would be governor, deputy governor in charge of the monetary policy and an officer of the RBI to be nominated by the Central Board.

The government-nominated members would be appointed on recommendations made by Search-cum-Selection Committee.

The Bill also requires the RBI to review its inflation target every five years. There is currently no set time frame for such reviews. The reform is a big boost for Rajan, who since taking office in 2013, has been trying to align the manner in which India sets monetary policy with that of Central banks in developed economies.