The Reserve Bank of India has constituted an Expert Committee on Economic Capital Framework under the Chairmanship of former RBI governor Bimal Jalan. The committee which is formed in consultation with the Government of India involves Rakesh Mohan as Vice Chairman along with four other members.
As per the RBI’s statement, the decision to constitute an Expert Committee to review the extant Economic Capital Framework of the RBI was taken by the Central Board of RBI in its meeting held on November 19, 2018. RBI also announced that the Expert Committee will submit its report within a period of 90 days from the date of its first meeting.
According to RBI, the purpose of the Expert Committee is to “review status, need and justification of various provisions, reserves and buffers presently provided for by the RBI, and review global best practices followed by the central banks in making assessment and provisions for risks which central bank balance sheets are subject to.”
As per RBI’s statement, the expert committee’s term of reference consists: “To suggest an adequate level of risk provisioning that the RBI needs to maintain. To determine whether the RBI is holding provisions, reserves and buffers in the surplus/deficit of the required level of such provisions, reserves and buffers.”
“To propose a suitable profits distribution policy taking into account all the likely situations of the RBI, including the situations of holding more provisions than required and the RBI holding less provisions than required. Any other related matter including treatment of surplus reserves, created out of realised gains if determined to be held.”
The six-member panel, which is headed by Bimal Jalan along with former deputy RBI governor Rakesh Mohan, comprises economic affairs secretary Subhash Chandra Garg, RBI central board members Bharat Doshi and Sudhir Mankad and deputy governor NS Vishwanathan.