Economic Capital Framework

● The economic capital framework 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. 

● As per this provision, the central bank is required to pay the balance of its profits to the central government after making provision for bad and doubtful debts, depreciation in assets, and contributions to staff. 

● For this, the Reserve Bank of India (RBI), in consultation with the central government, had constituted a Committee (Chair: Dr. Bimal Jalan) to review the current economic capital framework in 2018.