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Informist, Friday, May 23, 2025

 

--Govt source: RBI's economic capital framework stood the test of time 

--Govt source: RBI's economic capital framework may need only minor changes

--Govt source: Don't see need for major change to RBI econ capital framework 

 

NEW DELHI - There is no need for any major changes in the Reserve Bank of India's economic capital framework as it has stood the test of time, a top government source said on Friday, adding that the framework may only need minor tweaks.

 

"The framework did well when the economy was not doing as well as it is right now," the source said. "So, there is no need for major changes when the economy continues to be resilient."

 

The RBI's Central Board of Directors, including Governor Sanjay Malhotra, met last week to review the economic capital framework, which determines the appropriate level of risk provisions that the central bank has to make and the surplus that it transfers to the government. Informist previously reported the RBI's central board will meet on Friday (May 23) to discuss and approve the transfer of surplus to the government for the financial year 2024-25 (Apr-Mar). Economists expect the RBI to transfer a surplus of close to INR 3 trillion, which would be a record high.

 

Malhotra had said in February that the RBI was conducting an internal review of the economic capital framework recommended by the Bimal Jalan Committee, adopted in 2019.

 

The Jalan committee had recommended that the risk provisioning under the contingent risk buffer be maintained within a range of 5.50% to 6.50% of the RBI's balance sheet. The central board of the RBI had maintained the contingent risk buffer at 5.50% of the central bank's balance sheet to support growth and overall economic activity during 2018-19 (Apr-Mar) to FY22. As economic growth revived in FY23, the buffer was increased to 6.00%. The buffer was further increased to 6.50% for FY24.

 

Economic growth is reviving and consistently doing well, the source said. The RBI projects India's GDP growth at 6.5% in FY26, while economists see it closer to 6%. The government's second advance estimate has pegged FY25 GDP growth at 6.5%, provisional data for which, along with Jan-Mar growth, will be released on May 30.  End

 

Reported by Priyasmita Dutta

Written by Shubham Rana

Edited by Vandana Hingorani

 

 

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