The Reserve Bank of India (RBI), in consultation with the Union Government, on December 26, 2018 constituted an Expert Committee on Economic Capital Framework. The Committee will be headed by Bimal Jalan, while, former secretary Rakesh Mohan was named as the Vice Chairman.
The panel will decide on the appropriate size of reserves that the RBI should maintain and the dividend it should give to the government.
The decision regarding the constitution of the Committee was taken by the Central Board of Reserve Bank of India (RBI) in its meeting held on November 19, 2018.
Composition of the Committee
| S. No. | Name | Role in the Committee | Post |
| 1) | Bimal Jalan | Chairman | Former Governor of Reserve Bank of India |
| 2) | Rakesh Mohan | Vice Chairman | Former Deputy Governor of RBI and |
| 3) | Bharat Doshi | Member | Director of Central Board, RBI |
| 4) | Sudhir Mankad | Member | Director of Central Board, RBI |
| 5) | Subhash Chandra Garg | Member | Secretary, Department of Economic Affairs |
| 6) | N.S. Vishwanathan | Member | Deputy Governor of RBI |
Terms of Reference of the Committee
• Suggest an adequate level of risk provisioning that the RBI needs to maintain
• Determine whether the RBI is holding provisions, reserves and buffers in surplus or deficit of the required level of such provisions, reserves and buffers
• 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
Major task of the Committee
The Committee has also been tasked to review the extant Economic Capital Framework considering the: (i) Statutory mandate under Section 47 of the RBI Act, 1934. As per the Section 47, the profits of the RBI shall be transferred to the Government, after making provisions ‘which are usually provided by the bankers’ (ii) Public policy mandate of the RBI, including financial stability considerations Keeping the aforesaid considerations in mind, the Committee will:
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The Expert Committee will submit its report within a period of 90 days from the date of its first meeting.
What is Economic Capital Framework (ECF)?
The Economic Capital Framework (ECF) of the RBI handles the capital requirement for operation. The RBI holds ECF reserve of 27 percent.
The ECF amount can be used at the time of economic depression in the country. It can push more liquidity in the market to handle capital requirement.
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