The transfer (140% higher than last year) is based on the Revised Economic Capital Framework (ECF).
- RBI has also decided to increase the Contingency Risk Buffer (CRB) to 6.5% for FY 2023-24 from 6%.
About Surplus Transfer and ECF
- As the manager of Government finances, every year, the RBI pays a dividend to Government to help with the Government’s finances from its surplus profit.
- Section 47 of the RBI Act, 1934 mandates that any profits made by the RBI from its operations be sent to the Centre.
- ECF provides a methodology for determining the appropriate level of risk provisions and profit distribution to be made under Section 47 of the RBI Act, 1934.
Contingency Risk Buffer (CRB)
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- RBI constituted a Committee headed by Bimal Jalan to review the 2015-16 ECF in 2018.
- RBI also has to maintain a CRB within a range of 6.5% to 5.5% of the RBI’s balance sheet.
Ways by which RBI earn its profit
- Open market operations, wherein a central bank purchases or sells bonds.
- Interest received from bonds.
- Returns from its foreign currency assets.
- Lending to banks for very short tenures