RBI’s Contingency Fund (CF)

RBI’s Contingency Fund (CF)

Part of: GS Prelims and GS-III- Economy

 In news

• The RBI has retained an amount of Rs 73,615 crore within the RBI by transferring it to the Contingency Fund (CF).
• It shall lead to a sharp fall in the transfer of surplus to the government in the current year.

Important value additions

Contingency Fund (CF) 

• It is a specific provision meant for meeting unexpected and unforeseen contingencies.
• It includes depreciation in the value of securities, risks arising out of monetary/exchange rate policy operations, systemic risks and any risk arising on account of the special responsibilities enjoined upon the Reserve Bank. 
• This amount is retained within the RBI.
• Section 47 of the RBI Act: Profits or surplus of the RBI are to be transferred to the government, after making various contingency provisions.
• RBI’s’s main risk provision accounts: Contingency Fund, Currency and Gold Revaluation Account (CGRA), Investment Revaluation Account Foreign Securities (IRA-FS) and Investment Revaluation Account-Rupee Securities (IRA-RS).

The Currency and Gold Revaluation Account (CGRA) 

• It is maintained by the RBI to take care of currency risk, interest rate risk and movement in gold prices. 
• Unrealised gains or losses on valuation of foreign currency assets (FCA) and gold are not taken to the income account but instead accounted for in the CGRA.