FOREIGN EXCHANGE RESERVES OF INDIA

FOREIGN EXCHANGE RESERVES OF INDIA
➢ IMF has defined Foreign Exchange Reserves as external assets that are readily
available to and controlled by monetary authorities for direct financing of external
payments imbalances.
➢ The Foreign Exchange Reserves of India consists of four categories, i.e.,Foreign
Currency Assets, Gold, Special Drawing Rights (SDRs) and Reserve Tranche
Position (IMF).
➢ In India, 94% of the reserves are invested in foreign currency assets, 5% in gold and
the balance forms the SDRs and IMF reserve position.
➢ Forex reserves in India as on 30th March 2018 reached USD 424.4 billion (Foreign
Currency Assets: USD 399.2 billion, Gold: USD 21.6 billion, SDRs: USD 1.54
billion and Reserve Position in the IMF is USD 2.1 billion)
➢ FCA (Foreign Currency Assets) are maintained as a multi-currency portfolio
comprising major currencies, such as, US dollar, Euro, Pound sterling, Japanese yen,
etc. and are valued in terms of US dollars.
➢ Objectives of holding foreign exchange reserves are:
i) To support and maintain confidence in the policies for monetary and exchange rate
management including the capacity to intervene in support of the national or union
currency
ii) Limit external vulnerability by maintaining foreign currency liquidity to absorb shocks
during times of crisis or when access to borrowing is curtailed
iii) Provide a level of confidence to markets that a country can meet its external
obligations
iv) Demonstrate the backing of domestic currency by external assets assist the
government in meeting its foreign exchange needs and external debt obligations
v) Maintain a reserve for national disasters or emergencies