Question
Download Solution PDFThe Foreign Exchange Reserves (FER) of RBI include which of the following?
1. Foreign Currency Assets (FCA)
2. Gold
3. Special Drawing Rights (SDR)
4. Reserve Tranche Position
Select the correct answer using the codes given below.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is All of the above.
Key PointsThe Foreign Exchange Reserves (FER) of the Reserve Bank of India (RBI) typically include several components. These reserves are held to maintain stability in the Indian financial system and to ensure that the country can meet its international payment obligations. The components of the RBI's Foreign Exchange Reserves typically include:
- Foreign Currency Assets (FCA): This is the largest component of the FER and includes major currencies such as the US Dollar, Euro, Japanese Yen, British Pound, etc. These are held in the form of foreign government bonds, deposits with foreign central banks, and other foreign securities.
- Gold Reserves: This represents the physical gold held by the RBI. Gold is considered a store of value and an international reserve asset.
- Special Drawing Rights (SDRs): SDRs are an international reserve asset created by the International Monetary Fund (IMF). RBI holds a portion of its reserves in the form of SDRs.
- Reserve Tranche Position (RTP) with the IMF: This is a financial arrangement with the IMF and is part of India's international reserves.
- Other Reserve Assets: This category includes any other foreign exchange assets held by the RBI, such as foreign exchange derivatives.
These components make up the overall Foreign Exchange Reserves held by the RBI, and they play a crucial role in ensuring the stability of India's external financial position and the ability to meet international payment obligations. The composition of these reserves can change over time due to various factors, including exchange rate movements and international economic conditions. Hence all the options are correct.
Last updated on Jul 4, 2025
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