FOREX RESERVES

June 11, 2020

India’s foreign exchange reserves are rising and are slated to hit the $500 billion mark soon. In the month of May, forex reserves jumped by $12.4 billion to an all-time high of $493.48 billion (around Rs 37.30 lakh crore) for the week ended May 29.

About:

Meaning: Foreign-exchange reserves (also called forex reserves or FX reserves) are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.
Components: India’s foreign exchange reserves comprise
- Foreign currency assets (FCAs). These are maintained in currencies like US dollar, euro, pound sterling, Australian dollar and Japanese yen.
- Gold
- SDR (special drawing rights) in IMF: This is the reserve CURRENCY with IMF
- RTP (reserve tranche position) in IMF: This is the reserve CAPITAL with IMF
Reserves are denominated and expressed in the US dollar, which is the international numeraire for the purpose.
India’s FOREX is governed by RBI under RBI act,1934. The level of foreign exchange reserves is largely the outcome of the RBI’s intervention in the foreign exchange market.