Current Affairs
Daily Bits

In eight months, forex reserves rise by more than $100 billion

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    27th Nov, 2020

The forex reserves stood at $469.9 billion in the week ended March 20, 2020. It has risen by $102.8 billion since then and to touch $572.7 billion in the weekended November 13, 2020.

Context

  • The forex reserves stood at $469.9 billion in the week ended March 20, 2020. It has risen by $102.8 billion since then and to touch $572.7 billion in the weekended November 13, 2020.

What are Forex reserves?

  • Foreign exchange reservesor forex reserves are cash and other reserve assets held by a central bank or other monetary institution that are primarily available to balance payments of the country.
  • Foreign exchange reserves assets can comprise banknotes, deposits, bonds, treasury bills and other government securities of the reserve currency.

What it is comprised of in India?

  • The Foreign exchange reserves of India consist of below four categories-
    • Foreign Currency Assets
    • Gold
    • Special Drawing Rights(SDRs)
    • Reserve Tranche Position

What are the reasons?

  • a sharp decline in imports
  • strong foreign investment inflows
  • government measures
  • a sharp decline in imports of crude oil, electronics and gold due to a lockdown

Who govern it?

  • Reserve Bank of IndiaAct and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves. 
  • Reserve Bank of Indiaaccumulates foreign currency reserves by purchasing from authorized dealers in open market operations.

How it is helpful?

  • Foreign exchange reserves of India act as a cushion against rupee volatility once global interest rates start rising.
  • It also uses it as a tool for inflation management.
  • With higher foreign investment inflows, RBI has been buying dollars.

Verifying, please be patient.

X