Foreign exchange reserves are foreign currencies and assets held by central banks and monetary authorities that are primarily used to back their liabilities, such as the domestic currency issued, and influence monetary policy. The major components of India's foreign exchange reserves are foreign currencies like the US dollar, euro, pound, and yen, as well as gold, Special Drawing Rights allocated by the IMF based on member country quotas, and the reserve position in the IMF which is 25% of a country's Special Drawing Rights allocation and does not need to be immediately repaid.
2. What is it ?
Foreign Money kept with us(RBI)
-mostly US-Dollar, Euro, Pound, Japanese-Yen
Components of Forex
1. Foreign Currency Asset
2.Gold
3.Special Drawing Rights(SDR)
4.Reserve Position in IMF
3. Special Drawing Rights(SDR)
SDRs allocated to countries by the IMF
1 SDR is 1 unit of US Dollar/Euro/Pound/Yen
Rates per SDR changes once in 5 years
4. Reserve Position in IMF
Decided on the basis of countries Reserve
Tranche Position by IMF
25% of SDR
Need not to pay immediately
