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MC Explains: What is contingency risk buffer?

The board of the central bank, on May 19 raised the contingency risk buffer to 6 percent from 5.50 percent

May 19, 2023 / 19:41 IST
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RBI dividend

The Reserve Bank of India's (RBI) Central Board of Directors approved the transfer of Rs 87,416 crore as surplus to the Central government for 2022-23. The apex bank on May 19 said that the board also decided to raise the contingency risk buffer to 6.00 percent from 5.50 percent.

But what is contingency risk buffer and how does it work? Here's an explainer.

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What is the contingency risk buffer?

The contingency risk buffer is a specific provision fund kept by the central bank primarily to be used during any unexpected and unforeseen contingencies. These unforeseen contingencies could include depreciation of securities values, risks from monetary rate policy changes, systemic risks to the system, etc.