Mumbai: The former Reserve Bank governor Bimal Jalan-led panel reviewing the economic capital framework may be in favour of lowering of RBI reserves, according to media reports. The panel will hold at least two more meetings before finalising the report. “The panel’s recommendations will balance the issue of growth and monetary function. It will look at the way reserves were used during Asian Crisis of 1997 and Lehman Crisis of 2008”, the source told ET Now. The amount of reserves the central bank can keep was one of the key contentious issues between government and RBI and even forced the Former RBI governor Urjit Patel to step down in December last year, the report said.
Jalan-led panel will submit its report by June and could recommend transferring the reserves to the central government over a course of 4-5 years. “Any central bank has to come up with a consensus on what is the optimum level of reserves and transfer the rest to the central government over a period of time. Immediate transfer could be inflationary in nature.”, the source added.
The six-member Jalan panel was appointed on December 26, 2018, to review the Economic Capital Framework for the RBI. The committee was supposed to submit its report in 90 days from the first day of its meeting, which held on January 8. The other key members of the committee include Rakesh Mohan, former deputy governor of RBI as vice-chairman, finance secretary Subhash Chandra Garg, RBI deputy governor NS Vishwanathan, and two RBI central board members, Bharat Doshi and Sudhir Mankad.
