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Which of the following statements best describes the primary purpose of an Economic Capital Framework in financial institutions? 
  • a)
    To ensure compliance with regulatory capital requirements. 
  • b)
    To enhance the institution's ability to withstand economic shocks by determining the amount of capital needed to cover all risks. 
  • c)
    To maximize shareholder value through aggressive investment strategies. 
  • d)
    To provide a detailed breakdown of the institution's operational expenses.
Correct answer is option 'B'. Can you explain this answer?
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Which of the following statements best describes the primary purpose o...
  • Context: The Reserve Bank of India (RBI) approved a record transfer of ₹2,10,874 crore to the Union government for 2023-24, more than double the ₹87,416 crore transferred last year. The RBI also increased the Contingent Risk Buffer (CRB) to 6.50% from 6%. This surplus is based on the Economic Capital Framework (ECF) adopted in 2019.
  • What is Economic capital?
    • Economic capital is the amount of capital that a firm (in this case RBI), usually in financial services, needs to ensure that it stays solvent given its risk profile. It includes both realized and unrealized reserves.
    • Economic Capital Framework Objective: The framework aims to balance the RBI’s autonomy with the Government’s development goals.
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Which of the following statements best describes the primary purpose of an Economic Capital Framework in financial institutions?a)To ensure compliance with regulatory capital requirements.b)To enhance the institutions ability to withstand economic shocks by determining the amount of capital needed to cover all risks.c)To maximize shareholder value through aggressive investment strategies.d)To provide a detailed breakdown of the institutions operational expenses.Correct answer is option 'B'. Can you explain this answer?
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Which of the following statements best describes the primary purpose of an Economic Capital Framework in financial institutions?a)To ensure compliance with regulatory capital requirements.b)To enhance the institutions ability to withstand economic shocks by determining the amount of capital needed to cover all risks.c)To maximize shareholder value through aggressive investment strategies.d)To provide a detailed breakdown of the institutions operational expenses.Correct answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements best describes the primary purpose of an Economic Capital Framework in financial institutions?a)To ensure compliance with regulatory capital requirements.b)To enhance the institutions ability to withstand economic shocks by determining the amount of capital needed to cover all risks.c)To maximize shareholder value through aggressive investment strategies.d)To provide a detailed breakdown of the institutions operational expenses.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements best describes the primary purpose of an Economic Capital Framework in financial institutions?a)To ensure compliance with regulatory capital requirements.b)To enhance the institutions ability to withstand economic shocks by determining the amount of capital needed to cover all risks.c)To maximize shareholder value through aggressive investment strategies.d)To provide a detailed breakdown of the institutions operational expenses.Correct answer is option 'B'. Can you explain this answer?.
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