RBI surplus transfer

According to Section 47 of the RBI Act, profit of the RBI has to be transferred to the government periodically.
However, before transferring, some amount of the profit is kept aside for maintaining reserves of the RBI.

RBI’s reserves fall under four main heads: the Contingency Fund (CF), the Currency and Gold Revaluation Account (CGRA), the Asset Development Fund (ADF) and the Investment Revaluation Account (IRA).
CF is the corpus created to take care of unexpected and unforeseen contingencies, including depreciation in the value of securities held, systemic risks and risks arising out of monetary and exchange rate policy operations.
The ADF corpus is meant to be drawn upon for investments in subsidiaries and to meet internal capital expenditure etc.
Of these, the CGRA and the IRA are ‘notional’ in the sense that they are there to reflect the movements in the market prices of the asset classes (mainly gold, foreign currency and investments) to which they relate. No cash flow is involved in their case and the net credit balance in the CGRA account only indicates the unrealised or potential gain from the disposal by sale of those assets today.

The RBI has decided to transfer a surplus of ₹99,122 crore to the central government, while deciding to maintain the Contingency Risk Buffer at 5.50% as the minimum threshold as recommended by the Bimal Jalan committee.

The Bimal Jalan Committee on Economic Capital Framework was set up in 2018 to assess the adequate size of capital reserves that the RBI should hold.

The committee, in its final report submitted in 2019, recommended that the RBI should maintain a Contingent Fund between 5.5-6.5% of the RBI’s total assets.

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