The Ministry of Finance is closely watching the Reserve Bank of India’s (RBI) review of its rules on capital buffers.
These capital buffers affect how much surplus or dividend the RBI can transfer to the government.
The RBI is reviewing its Economic Capital Framework (ECF), which was last revised in 2018 by the Bimal Jalan committee.
The committee had suggested that the Contingency Risk Buffer (CRB) should be 5.5%–6.5% of RBI’s balance sheet to protect against financial crises.
If the CRB is set lower, the RBI can transfer more surplus money to the government.
The government may need extra funds this year, possibly for increased defence spending due to tensions with Pakistan.
The Finance Ministry is doing its own separate review of the capital buffer levels, alongside the RBI's review.
Some believe the earlier recommendations were too cautious and there may be room to reduce the buffer level.
The government says it’s not under financial pressure but would welcome a higher surplus from the RBI to allow more spending flexibility.
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