Economic Capital Framework (ECF) Review by the RBI
The Reserve Bank of India (RBI) is in discussions to expand the range of the Contingent Risk Buffer (CRB), as per sources informed to Business Standard. The CRB is currently set between 5.5% and 6.5% of the RBI's balance sheet, following the Bimal Jalan committee recommendations.
Recent Developments and Decisions
- The surplus transferred to the government is contingent on the size of the risk buffer. A larger buffer results in a smaller surplus and vice versa.
- The RBI board plans to meet again on May 23 to approve the FY25 accounts and decide on the surplus transfer, pending government approval.
- The current framework, effective since 2019, is reviewed every five years as per the Bimal Jalan committee's advice.
Past Adjustments and Economic Growth
- From 2018-19 to 2021-22, due to challenging macroeconomic conditions and the pandemic, the CRB was maintained at 5.50% to support economic growth.
- With economic growth recovery in 2022-23, the CRB was raised to 6.00%, and further to 6.50% in 2023-24, reflecting a strong and resilient economy.
Surplus Transfer and Economic Indicators
- For 2023-24, the board approved a record surplus transfer of ₹2.11 trillion to the central government.
- RBI's balance sheet grew by ₹7.02 trillion (11.08%) to reach ₹70.48 trillion in 2023-24.
- Expectations for 2024-25 show potential for another record surplus ranging from ₹2.2 trillion to ₹3.1 trillion, influenced by the CRB's lower limit.
