External Capital Framework

5.External Capital Framework: RBI Governor Sanjay Malhotra announced that the Economic Capital Framework (ECF) is under review to determine risk provisioning and surplus distribution.

• About: The ECF guides how the RBI manages financial reserves, risk provisioning, and surplus transfers to the government.
• Bimal Jalan Committee Recommendations: Suggested reviewing the ECF every five years, with recommendations valid from June 2019 – June 2024.

oRecommended maintaining a 5.5–6.5 per cent ratio of the balance sheet as a contingency risk buffer, RBI is evaluating whether modifications are needed to address changing financial conditions.

• Effect of CRB Adjustments on Future Dividends:

oHigher CRB → More reserves, less surplus for government transfers.

oLower CRB → Frees up funds, increases dividend payments.