RBI transfers surplus₹2.87 lac cr. to central govt.

 Maintaining CRB 
at the discretion of Central Board:

RBI should ponder over a few points

Reserve Bank of India (RBI) press release says "Taking into consideration the current macroeconomic factors, financial performance of the Bank and maintenance of appropriate risk buffers, the Central Board decided to transfer ₹1,09,379.64 cr. towards the CRB for FY 2025-26 .... and maintain the CRB at 6.5 percent of the size of the RBI Balance Sheet. The Central Board approved the transfer of surplus of ₹2,86,588.46 cr. to the Central Government for the accounting year 2025-26". 

The Economic Capital Framework (ECF) introduced in August 2019 was internally reviewed by RBI and the revised ECF was implemented in March 2025. The revised framework provides flexibility to maintain the Contingent Risk Buffer (CRB) between the range of 4.5% and 7.5% of the size of the Balance Sheet. The Central Board of RBI is given the discretion to maintain the CRB between 4.5-7.5%, with the board required to take into account various macro economic factors for maintenance of appropriate risk buffers. For the accounting year 2024-25, the Central Board decided to maintain CRB (also called Available Realised Equity (ARE)) at 7.5% of the size of the RBI Balance Sheet and transferred ₹44,861.70 cr. to the Contingency Fund (CF), from its net income, before transferring the surplus to the Central Government. For the current accounting year 2025-26 the Central Board decided to maintain CRB at 6.5% and transferred ₹1,09,379.64 cr. to CF so as to keep the ARE at 6.5% of the size of RBI Balance Sheet. While the decisions of the Central Board of RBI to maintain CRB at 7.5% for 2024-25 and 6.5% for 2025-26 (of the respective sizes of the RBI Balance Sheets) are perfectly in line with the discretion given in the revised ECF, it will be worthwhile for RBI to ponder over the following points, which may provide adequate cushion and pave way for enhancement in Corporate Governance.

1. The ruling rate of ₹ versus USD 1 was ₹85.47 as on 31st March 2025 and was ₹93.48 as on 31st March 2026, indicating a decline of over 9% in the said period. If we compare the same between May 25 and May 26 (₹84.21 and 95.74), the decline in the value of ₹ versus USD is more than 13%. Considering the volatility of Indian Rupee and the purpose of ARE is to meet exigencies, it will be in order if the CF is maintained at a cushion of at least 10% more than what is required to be maintained at Indian Rupee level. This will take care of the volatilities in Indian Rupee in the next accounting year and ensure that ARE do not fall below the required per cent fixed by the Central Board before the next Balance Sheet is audited. (Similar to the need to maintain LTV in gold loans extended by the banks through the period of the loan) 

2. The purpose of the ECF was two fold - one - to maintain CRB to meet monetary and financial stability risks, credit risk and operational risk in the financial system - and the other  - to have a Surplus Distribution Policy (SDP) after determining the CRB percent of the RBI Balance Sheet size. Since the surplus, after determining the percent of CRB, is transferred to the Central Government, conflict of interest is perceived, if the nominee of the Central Government do not recuse himself from such decisions. The press release says that Secretary, Department of Financial Services (as a director of the Central Board) attended the meeting. Recusing oneself, where conflict of interest is perceived, will only enhance Corporate Governance further.

Regards

V. Viswanathan
CGM Retired, e-SBT

25th May 2026.




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