New Delhi, May 26 -- The Reserve Bank of India has formally recognised that government ownership of public sector banks significantly reduces its own financial risks when providing emergency support to these institutions.

In its latest economic capital framework report, the central bank outlined how sovereign backing has demonstrably reduced the potential losses it faces when extending emergency liquidity assistance to state-owned lenders.

The RBI's assessment treats government-owned banks as inherently safer financial institutions compared to their private sector counterparts, citing the government's role as a parent entity with substantial financial resources.

The central bank attributes this reduced risk profile to what it terms the...