In a marked shift in its risk provisioning framework, RBI has adopted a more flexible approach to determine its buffer, based on realised and projected macroeconomic volatility. This is an improvement over the existing framework that was based on the 2019 Jalan Committee recommendation. Consequently, the dividend payout to the central government, derived as a residual, will also be subject to RBI’s assessment of macroeconomic risks.Consequently, the central bank has revised the upper bound for Contingent Risk Buffer to 7.50% of the RBI’s total assets, up from 6.50%. The floor has also been adjusted downward to 4.5%. The earlier range set by the Jalan Committee was 5.5-6.5%.
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