Expert panel to examine Reserve Bank of India's economic capital framework to be formed within a week

The committee for Reserve Bank of India's (RBI) economic capital framework (ECF) will be formed with a week, government sources said.

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On Monday, the RBI said it has decided to set up an expert panel to examine the economic capital framework of the central bank, in a move that could prompt a rethink of what constitutes adequate capital reserves for the central bank.

Reserve Bank of India. Reuters

For weeks, government officials have been pressuring the RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government.

Economic capital framework refers to the risk capital required by the central bank while taking into account different risks.

The government and the central bank will jointly decide on the members of the panel and the scope of the panel, the RBI said in a statement late on Monday.

In addition, the RBI said its financial supervision board will examine the issue around easing of the prompt corrective action plan for some banks - another key of contention between the government and the central bank.

In a press release issue post the RBI Board meeting on Monday, the RBI said: The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI.

The Board also advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to 250 million, subject to such conditions as are necessary for ensuring financial stability, the release said.

--With inputs from agencies