NEW DELHI: It’s official. As first reported by this paper on December 4, former RBI governor Bimal Jalan will chair the Expert Committee on Economic Capital Framework to determine how much surplus funds the central bank should retain. The RBI announced Jalan’s appointment on Wednesday. The Economic Capital Framework was one of the sticking points between the RBI and the government during their recent tug of war, which ended up in Urjit Patel stepping down as RBI Governor.
“The Expert Committee on Economic Capital Framework will suggest adequate level of provisions, reserves and buffers to be held by the RBI, and determine whether the same are held in surplus or deficit of the suggested levels by the central bank,” the RBI said in a statement. The committee will review global best practices while making its assessment and provisions for risks.
The panel will also propose a suitable profit distribution policy after considering all contingencies. It will estimate the impact of the RBI holding more or less reserves than required. It will also look at treatment of surplus reserves created out of realised gains, if determined to be held.
The expert committee will submit its report within 90 days of its first meeting, the RBI stated.
On November 19, the central board of the RBI had decided to constitute an external committee to examine its economic capital framework. The composition and terms of reference of the committee were to be decided jointly by the government and the RBI.
Rakesh Mohan to be vice chairman
The six-member panel has former deputy governor Rakesh Mohan as vice chair and RBI central board directors Bharat Doshi and Sudhir Mankad, Economic Affairs Secretary Subash Chandra Garg and RBI Deputy Governor N S Vishwanathan as members