FOREIGN RESERVE EXCHANGE (Syllabus: GS Paper 3 – Economy)

Context: Recently, the Reserve Bank announced that India's foreign exchange reserves rose by USD 2.538 billion to reach USD 597.935 billion for the week ended.

Foreign Reserve Exchange

• About: Foreign exchange reserves consist of assets held by a central bank in foreign currencies, encompassing bonds, treasury bills, and other government securities.

oIt is important to highlight that the majority of these reserves are denominated in US dollars.

• India’s Forex Reserve include: Foreign Currency Assets, Gold reserves, Special Drawing Rights and Reserve position with the International Monetary Fund (IMF).
• Role of RBI in Forex Reserves: The RBI serves as the guardian of the nation's foreign exchange reserves and oversees exchange control.
• Objectives: Maintaining and bolstering trust in policies related to monetary and exchange rate management.

oEmpowering the capability to intervene in favor of the currency of your nation or union.

oMitigating external vulnerability by ensuring the availability of foreign currency liquidity to absorb shocks during crises or when borrowing is constrained.