Economic Capital Framework And Rbis Dividend
Why in News?
- The Reserve Bank of India’s (RBI) mechanisms for determining surplus transfers to the government, guided by the Economic Capital Framework (ECF).
Important Key Points:
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Economic Capital Framework (ECF): Established based on the recommendations of the Bimal Jalan Committee in 2019, the ECF provides a structured approach for the RBI to assess its capital requirements and determine the surplus transferable to the government. The framework aims to balance the central bank’s need for financial resilience with the government’s fiscal requirements.
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Surplus Transfer Mechanism: Under the ECF, the RBI maintains a Contingent Risk Buffer (CRB) within a range of 5.5% to 6.5% of its balance sheet. Surpluses beyond this buffer are considered transferable to the government. This approach ensures that the RBI retains sufficient capital to manage monetary policy and financial stability while contributing to the government’s fiscal resources.
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Recent Developments: In May 2025, the RBI’s central board reviewed the ECF, marking five years since its implementation. This review aligns with the committee’s recommendation for periodic assessments to ensure the framework remains relevant amidst evolving economic conditions. Economists anticipate a record surplus transfer to the government for FY25, potentially reaching ₹3 lakh crore, a significant increase from the previous year’s ₹2.11 lakh crore transfer.
