Q. Which of the following statements best describes “Contingent Reserve Arrangement (CRA)”?

[A] It is a facility for both Centre and state to borrow from RBI, to meet temporary mismatches in cash flows.

[B] It is an important cross regional financing arrangement of BRICS to meet short-term liquidity needs.

[C] Emergency loan facility of International monetary fund (IMF) under which India borrowed during its 1991 BOP crisis.

[D] It is a portion of the required quota of currency each member country must provide to the IMF that can be utilized for its own purposes without a service fee or economic reform conditions.

Answer: B
Notes:
  • BRICS Contingent Reserve Arrangement (CRA) is a framework for the provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures. 
  • Statement a is incorrect- Reserve Bank of India (RBI) gives temporary loan facilities to the central and state governments. This loan facility is called Ways and Means Advances (WMA).  
  • Statement d is incorrect-The statement is referring to reserve tranche. 

Source- https://www.pib.gov.in/PressReleasePage.aspx?PRID=1790712 

Blog
Academy
Community