Economic Capital Framework (ECF)/CRB

Why in News? The Reserve Bank of India (RBI) approved a record dividend transfer of Rs2,68,590.07 crore to the Union government for the accounting year 2024-25, a 27% increase from the previous year’s Rs2,10,874 crore.

The decision is based on a revised Economic Capital Framework (ECF) and includes an increase in the Contingent Risk Buffer (CRB) to 7.5%, reflecting prudent financial management amid favorable macroeconomic conditions.

Relevance : UPSC Pre &  Mains

Prelims :ECF/CRB

Mains :   GS 3

Key Points of the News:

Dividend Transfer:

1. • The RBI approved a surplus transfer of Rs2,68,590.07 crore as a dividend to the Union government for FY 2024-25.
   • This is 27% higher than the previous year’s dividend of  Rs2,10,874 crore.

Revised Economic Capital Framework (ECF):

1. • The surplus was calculated based on the revised ECF, approved by the RBI board on May 15, 2025.
   • The ECF guides the RBI’s financial risk management and surplus distribution.

Contingent Risk Buffer (CRB):

1. • The CRB was increased to 7.5% of the RBI’s balance sheet size for FY 2024-25, up from 6.5% in FY 2023-24 and 6% in FY 2022-23.
   • During FY 2018-19 to 2021-22, the CRB was maintained at 5.5% due to macroeconomic challenges and the COVID-19 pandemic.

What are surplus & Dividend?

When the Reserve Bank of India (RBI) earns more money than it spends, the excess amount is called a “surplus.” The RBI, being the central bank of India, shares this surplus with the government as a dividend. This helps the government have more funds to use for its expenses, like building roads, improving schools, or providing subsidies.