- Economic Capital Framework (ECF) determines fund allocation to RBI’s capital reserves.
- It ensures adequate funds to fight financial system crises.
- It also guides the transfer of remaining net income to the government.
- ECF is relevant for financial stability by ensuring RBI has capital to absorb risks.
- It helps maintain solvency and manage potential financial system shocks.
- The Bimal Jalan Committee recommended maintaining 5.5% to 6.5% of the balance sheet as Contingency Risk Buffer.