According to the Reserve Bank of India (RBI), India’s forex (foreign exchange) reserves have touched record high of $424.864 billion in April 2018. The surge was due to massive spike in foreign currency assets (FCAs), a key component of the reserves.
The forex reserve had crossed $400-billion mark for the first time in September 2017, but has since been fluctuating.
In the last week, the forex reserves had surged by $1.828 billion to $424.366 billion. It experienced crossed the $400-billion tag for the very first time in the week to 8 Sept 2017, but has since been fluctuating.
In the confirming week, the foreign currency assets, a significant component of the entire forex reserves, rose by $657.7 million to $399.776 billion.
Expressed in america dollar conditions, the forex assets are the aftereffect of appreciation or depreciation of the non-US currencies like the euro, the pound and the yen kept in the reserves.
The special sketching rights with the International Monetary Fund dropped by USD 10 million to USD 1.534 billion.
The country’s reserve position with the IMF also reduced by USD 13.4 million to USD 2.070 billion.
- The components of India’s FOREX Reserves include Foreign currency assets (FCAs), Gold Reserves, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Finance (IMF).
- FCAs constitute largest component of Indian Forex Reserves and are portrayed in US money terms.
- The forex are reserve assets held by a central loan company in foreign currencies.
- It acts as buffer to be used in challenging times and used to back liabilities on their own issued currency as well as to influence monetary policy.
- Almost all countries in world, irrespective of size of their economy, hold significant foreign exchange reserves.
Foreign currency assets (FCAs)
The Forex reserves of India are India’s holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies apart from India’s national currency, the Indian rupee.
The reserves are handled by the Reserve Standard bank of India for the Indian authorities and the primary component is forex assets.
Foreign exchange reserves become the first type of defense for India in case there is financial slowdown, but acquisition of reserves has its costs.
Forex reserves facilitate exterior trade and payment and promote orderly development and maintenance of forex in India.