RBI approved transfer ₹2,10,874 crores surplus to Centre FY24

RBI approved transfer ₹2,10,874 crores surplus to Centre FY24

The Reserve Bank of India Board has recently decided to transfer the surplus amount in a windfall gain for the Centre, around ₹2,10,874 crores to the Union Government for the accounting year 2023-24.

In this accounting year, RBI is going to transfer the double amount that it had transferred to the Union Government last year which was ₹87,416 crores.

More information:

Apart from that some other decisions have been also taken by the board such as to increase the Contingent Risk Buffer CRB to 6.50 percent for the year 2023-24. The CRB for the last year was around 6 percent.

The surplus amount is calculated on the basis of the Economic Capital Framework ECF that was adopted by the Reserve Bank of India on 26th August in the year of 2019.

Reasons:

The reason for the increased surplus amount is the higher income of RBI generating from domestic as well as foreign assets and accounted for the higher profit, as per the official statement.

Economic Capital Framework:

The Economic Capital Framework (ECF) of the Reserve Bank of India (RBI) refers to the methodology used by the central bank to assess its capital requirements. The RBI periodically reviews its ECF to ensure that it maintains adequate reserves to absorb various types of risks, fulfill its functions effectively, and maintain financial stability in the country.

Conclusion:

The Reserve Bank of India (RBI) introduced the Contingent Risk Buffer (CRB) framework as part of its revised guidelines on the implementation of Basel III capital regulations for banks in India. The CRB aims to address the risks associated with credit, market, and operational losses that banks may face during periods of stress.

It requires banks to maintain a buffer of Common Equity Tier 1 (CET1) capital to absorb these losses, thus enhancing the resilience of the banking sector and promoting financial stability

Important Questions:

• What is the Contingent Risk Buffer?
• What is the Economic Capital Framework?

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