(LiveMint)
The expert committee to examine the economic capital framework (ECF) of the Reserve Bank of India (RBI) will be formed within a week, two people aware of the discussions said, adding that it will submit its report by the end of February. RBI had on Monday announced, after a meeting of its central board, that the membership and terms of reference of the committee will be jointly determined by the government and the central bank.
The first person cited above said the committee will examine the optimum level of reserves required to be maintained by the central bank. It will be on the lines of earlier committees like the Subrahmanyam Group (1997), the Usha Thorat Group (2004) and the Malegam Committee (2013). All three committees have suggested different levels of reserves to be maintained by the central bank.
The Subrahmanyam Group had recommended that contingency reserve should be built up to 12% of the total assets and set a timeline for achieving the same till 2005. The Usha Thorat Group assessed the reserve adequacy at 18% and the Malegam Committee had pointed out that adequate amount of the profits should continue to be transferred each year to the contingency reserve.
