Economic Capital Framework (ECF)

Economic Capital Framework (ECF): Recently, the Reserve Bank of India's (RBI) central board convened in Mumbai to review the Economic Capital Framework (ECF), assessing the central bank’s capital requirements and risk management strategies.

• About ECF : Outlines how the Reserve Bank of India (RBI) manages its financial reserves, risk provisioning, and surplus (dividend) transfers to the central government.

o Introduced in 2019 based on recommendations by the Bimal Jalan Committee (2018).

o It prescribes rules for Contingency Risk Buffer (CRB): A financial safeguard maintained by RBI to address unforeseen economic shocks.

o The framework is reviewed every five years, with the next review due in August 2024.

o Ensures RBI’s financial resilience and supports its role as the Lender of Last Resort (LoLR) in times of crisis.