Economic Capital Framework – Internal Review 2025

Description

The Economic Capital Framework of the Reserve Bank of India – Internal Review of the Framework (May 2025) evaluates the effectiveness of the 2019 ECF adopted after the Bimal Jalan Committee’s recommendations.

Conducted after a five-year interval, the review affirms that the framework has successfully safeguarded RBI’s financial stability despite pandemic-induced shocks, geopolitical tensions, and global monetary tightening.

It recommends continuity of core principles with refinements such as integrated risk assessment for on- and off-balance sheet exposures, inclusion of minor currency assets, and enhanced flexibility for market risk buffers.

The review also widens the range for monetary and financial stability risks to 5.0 ± 1.5% of the balance sheet, ensuring smoother surplus transfers to the government.

Overall, it reinforces RBI’s resilience, credibility, and ability to manage systemic risks while aligning with global central banking best practices.