The Economic Capital Framework (ECF) is a structured mechanism and risk management policy used by the Reserve Bank of India (RBI) to determine the quantum of capital reserves it must maintain and the surplus profit it can transfer to the Central Government. This framework is directly connected to Section 47 of the RBI Act, 1934, which governs the distribution of the central bank's profits. The ECF was originally formulated based on the recommendations of an expert committee led by former RBI Governor Bimal Jalan, which was appointed in November 2018. The framework was adopted by the RBI's Central Board in its 578th meeting on August 26, 2019, to balance the RBI's need for financial resilience with the government's fiscal requirements.
The core mechanism of the ECF is the Contingency Risk Buffer (CRB), which is a financial safeguard against unforeseen monetary, credit, and operational risks, including the RBI's role as the Lender of Last Resort (LoLR). The CRB is maintained as a percentage of the RBI's balance sheet. The original Bimal Jalan Committee recommended that the CRB be maintained within a range of 5.5% to 6.5% of the balance sheet.
The ECF is subject to a five-year periodic review as recommended by the Bimal Jalan Committee. The first such review led to a revision, which was approved by the Central Board on May 15, 2025. For the financial year 2024-25, the revised framework expanded the CRB range to 4.5% to 7.5% of the balance sheet, up from the previous 5.5% to 6.5%. This wider range provides the RBI with greater flexibility to manage risk buffers based on macroeconomic conditions and smooth surplus transfers to the Central Government, which receives the surplus as non-tax revenue. For the fiscal year 2024-25, the RBI approved a record surplus transfer of approximately ₹2.69 trillion to the government.