RBI Sets Up Expert Committee For Economic Capital Framework

Headed by its former governor Bimal Jalan, the Reserve Bank of India (RBI) has constituted an expert committee to look at its Economic Capital Framework. The committee also includes former RBI deputy governor Rakesh Mohan, central board members Bharat Doshi and Sudhir Mankad, Economic Affairs Secretary Subhash Chandra Garg and RBI Deputy Governor NS Vishwanathan, as per a statement on the central bank's website. The committee is expected to submit their report in 90 days of the first meeting.

The panel would serve as a team to review status, need and justification of various provisions, reserves and buffers that are held by the RBI and suggest adequate levels of provisioning to be maintained by the bank. It will help the central bank determine if the those are in surplus or deficit of said levels and a suitable profit distribution policy would be proposed.

After differences between the government and the RBI was made public, the decision to create such an expert committee was made at the central board meeting held on 19 November. The major issue among others between the government and RBI was that the central bank was holding excess reserves that could be transferred to the government. These issues will be looked at by the expert committee.