Expert panel formed to determine size of RBI reserves, Bimal Jalan named chairman

The Reserve Bank of India (RBI) has set up the Expert Committee on Economic Capital Framework on Wednesday. The expert panel will be headed by former RBI Governor Bimal Jalan. Former Deputy Governor Rakesh Mohan has been named the vice chairman of the committee.

The other four members on the six-member panel include RBI Central Board directors Bharat Doshi and Sudhir Mankad, Economic Affairs Secretary Subash Chandra Garg and RBI Deputy Governor NS Vishwanathan, according to a statement by the RBI.

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, RBI said in its statement.

Keeping in line with the provisions of the RBI Act surrounding the profits of the central bank, this expert committee "will review status, need and justification of various provisions, reserves and buffers presently provided for by the RBI". It will also review and suggest best practices by other central banks in "making assessment and provisions for risks which central bank balance sheets are subject to".

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The panel will also propose a suitable profit distribution policy after considering all contingencies. It will estimate what happens if RBI holds more as well as less reserves than required. It will also look after matters including 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.

The government and the RBI have been locked in a tussle over various issues, including transfer of excess reserves of the central bank.

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Finance Minister Arun Jaitley had earlier said the government does not need any extra funds from the RBI or any other institution to meet the fiscal deficit target.

Garg too had earlier tweeted that there is no proposal to ask the RBI to transfer excess reserves and the only issue under discussion "is to fix appropriate economic capital framework of RBI".

Edited by Vivek Punj