{"id":13588,"date":"2023-07-31T11:43:02","date_gmt":"2023-07-31T06:13:02","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=13588"},"modified":"2025-04-02T05:36:17","modified_gmt":"2025-04-02T00:06:17","slug":"what-is-foreign-exchange-reserves","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/what-is-foreign-exchange-reserves\/","title":{"rendered":"What is &#8216;Foreign Exchange Reserves&#8217;?"},"content":{"rendered":"<h2><strong>About Foreign Exchange Reserves:<\/strong><\/h2>\n<p>&nbsp;<\/p>\n<ul>\n<li><strong>What is it?<\/strong> Foreign Exchange Reserves (also called F<strong>orex Reserves<\/strong>) are <strong>reserve assets held by a central bank in foreign currencies.<\/strong><\/li>\n<li>These may <strong>include foreign currencies, bonds, treasury bills, and other government securities.<\/strong><\/li>\n<li>Reserves are <strong>denominated and expressed in the US dollar<\/strong>, which is the international numeraire for the purpose.<\/li>\n<li><strong>RBI is the custodian<\/strong> of the Foreign exchange reserves in India.<\/li>\n<li><strong>India\u2019s foreign exchange reserves comprise<\/strong> of;\n<ul>\n<li><strong>Foreign currency assets (FCAs):<\/strong>These are maintained in currencies like the US dollar, euro, pound sterling, Australian dollar and Japanese yen.<\/li>\n<li><strong>Gold<\/strong><\/li>\n<li><strong>SDR<\/strong> (<strong>Special Drawing Rights)<\/strong>: This is the <strong>reserve currency with IMF.<\/strong><\/li>\n<li><strong>RTP<\/strong> (Reserve Tranche Position): This is the <strong>reserve capital with IMF.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li>The <strong>biggest contributor <\/strong>to India\u2019s Forex reserves\u00a0<strong>is foreign currency assets, followed by gold.<\/strong><\/li>\n<li><strong>Purpose<\/strong>:\n<ul>\n<li>They are <strong>used to back liabilities on their own issued currency<\/strong>, <strong>support the exchange rate<\/strong> and <strong>set monetary policy.<\/strong><\/li>\n<li>To ensure that <strong>RBI has backup funds if their national currency rapidly devalues <\/strong>or becomes altogether insolvent.<\/li>\n<li><strong>If the value of the Rupee decreases<\/strong> due to an increase in the demand of the foreign currency, then <strong>RBI sells the dollar<\/strong> in the Indian money market s<strong>o that depreciation of the Indian currency can be checked.<\/strong><\/li>\n<li><strong>A country with a good stock of forex has a good image at the international level <\/strong>because the trading countries can be sure about their payments.<\/li>\n<li>A<strong> good forex reserve helps in attracting foreign trade<\/strong> and earns a good reputation with trading partners.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3>Q1)\u00a0What are treasury bills?<\/h3>\n<p>Treasury bills, often referred to as T-bills, are short-term debt instruments issued by the government to raise funds to meet short-term financial requirements. They are one of the safest and most liquid investments available in the financial markets. Treasury bills are issued by the government through the central bank and are backed by the full faith and credit of the government.<\/p>\n<p><strong>Source:<\/strong>\u00a0<a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/indicators\/indias-forex-reserves-fall-by-1-9-billion-to-607-03-billion\/articleshow\/102213008.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\"><u>India&#8217;s forex reserves fall by $1.9 billion to $607.03 billion<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Foreign Exchange Reserves (also called Forex Reserves) are reserve assets held by a central bank in foreign currencies.<\/p>\n","protected":false},"author":5,"featured_media":13589,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-13588","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/13588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=13588"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/13588\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/13589"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=13588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=13588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=13588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}