What difference between realised equity and revaluation balance of rbi?
Answers
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Answer:
The new Economic Capital Framework adopted by the RBI has maintained its global standing as one of the most resilient frameworks. The Bimal Jalan Committee has outlined the distinction between the two components of economic capital – realised equity and revaluation balances. The former is built of retained earnings and will be used for calculating future transfers from the RBI to the government, contingent on it remaining above the requirement of 5.5-6.5% of total assets.
The new Economic Capital Framework adopted by the RBI has maintained its global standing as one of the most resilient frameworks. The Bimal Jalan Committee has outlined the distinction between the two components of economic capital – realised equity and revaluation balances. The former is built of retained earnings and will be used for calculating future transfers from the RBI to the government, contingent on it remaining above the requirement of 5.5-6.5% of total assets.This measure recognises the fact that revaluation balances are an accounting entry generated out of market movements and the globally accepted practice of not distributing this reserve is prudent. Further, the adoption of the Expected Shortfall in place of the Stressed-Value at risk methodology is also welcome as it is conservative and allows for recognition of more losses as compared to the VAR measure.
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