The Reserve Bank of India on Wednesday constituted an expert committee to review the extant economic capital framework of the central bank.
"As decided by the Central Board of Reserve Bank of India (RBI) in its meeting held on November 19, 2018, the RBI, in consultation with the Government of India, has today constituted an Expert Committee to review the extant Economic Capital Framework of the RBI," it said in a statement.
The committee will be headed by Bimal Jalan, former RBI governor, while Rakesh Mohan, former deputy governor and former DEA (Department of Economic Affairs) secretary, is the vice chairman of the committee.
Other members include RBI central board directors Bharat Doshi and Sudhir Mankad; Subhash Chandra Garg, secretary, DEA, and NS Vishwanathan, RBI deputy governor.
This comes after government officials pressured the RBI for weeks to accede to a range of demands, from handing over surplus reserves to the government to easing of lending curbs.
The expert committee will determine the appropriate levels of reserve the central bank should hold.
The committee is supposed to submit its report within a period of 90 days from the date of its first meeting.
The terms of reference of the committee are given below:
The government has been sparring with the RBI on deciding a fixed formula for transferring dividend to the government as it believes the central bank currently uses an "arbitrary" method.
The government wants to set a clear formula for transfer of the funds as the calculation of fiscal deficit and expenditures can be upset if the amount of transfer is lower-than-expected.
With inputs from Reuters.