Bimal Jalan heads panel on RBI’s economic capital framework
27 Dec 2018
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Under constant pressure from the government to dilute its excess capital, the Reserve Bank of India (RBI) has decided to constitute an expert panel to decide on the appropriate size of RBI’s reserves.
The central bank on Wednesday constituted a six-member committee headed by former RBI governor Bimal Jalan and former secretary Rakesh Mohan as the vice chair.
The panel will include economic affairs secretary Subhash Chandra Garg and RBI deputy governor N S Vishwanathan, the RBI said in a statement.
Bharat Doshi and Sudhir Mankad who are members of the central board of the RBI, will be other two members of the expert committee on Economic Capital Framework.
The committee will assess the extent of the profits of the RBI that can be transferred to the government, after making provisions ‘which are usually provided by the bankers’, and public policy mandate of the RBI, including financial stability considerations.
The committee will 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.
The committee has been asked to suggest an adequate level of risk provisioning that the RBI needs to maintain as also determine whether the RBI is holding provisions, reserves and buffers in surplus / deficit of the required level of such provisions, reserves and buffers.
Accordingly, the committee will formulate 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.
The committee will also look into any other related matter, including treatment of surplus reserves, created out of realised gains, if determined to be held.
The expert committee will submit its report within a period of 90 days from the date of its first meeting.
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