Revised Economic Capital Framework of the Reserve Bank of India approved by the Central Board

Business Standard

23-05-2025

In 578th meeting held on August 26, 2019; the Reserve Bank of India Central Board had adopted the Economic Capital Framework based on the recommendations of the Expert Committee to Review the Extant Economic Capital Framework of the Reserve Bank of India (Chairman: Dr. Bimal Jalan). The Expert Committee, inter-alia, recommended that the framework may be periodically reviewed every five years. In line with the recommendation of the Expert Committee, the Bank undertook an internal review of the framework, based on the experience gained from the operationalization of the extant ECF, developments in the external operating environment, and changes in the asset profile of the RBI. The outcome of the review was considered by the Central Board in its meeting held on May 15, 2025, and a revised framework was approved.
It was noted by the Central Board that the extant ECF had met its objective of ensuring a resilient balance sheet for RBI, while maintaining healthy transfer of surplus to the Government. Accordingly, it was decided to retain the broad principles underlying the extant ECF, with no major changes in risk assessment methodologies. Certain changes have, however, been made with the objective of further strengthening the framework to align better with any emerging risks to the balance sheet of the RBI. The revised ECF provides requisite flexibility year-on-year to the Central Board in the maintenance of risk buffers, considering the prevailing macroeconomic and other factors, while also ensuring needed inter-temporal smoothening of the surplus transfer to the Government.