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Forex Reserves
Why is it in the news?
- According to the latest RBI data, India's foreign exchange reserves surged by $1.620 billion to $430.572 billion on rise in foreign currency assets.
- In the previous reporting week ended on 2 August, the reserves had declined by $697.2 million to $428.952 billion.
More in the news
- The country's gold reserves surged by $1.591 billion to $26.754 billion.
- Special drawing rights with the International Monetary Fund were up by $6.7 million to $1.441 billion.
- The country's reserve position with the fund rose by $7 million to $3.636 billion.
Forex Reserves:
- Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.
- The forex reserve is also kept as a cushion against any potential balanced of payment related crisis.
- India’s foreign exchange reserves comprises of (i) Foreign currency assets (FCA), (ii) Gold, (iii) Special Drawing Rights (SDRs) and (iv) Reserve tranche position (RTP) in the International Monetary Fund.
Import Cover:
- Import cover is a measure of the number of months of imports that can be covered with foreign exchange reserves available with the central bank of the country.
- It is an important indicator of the stability of a currency.
- Eight to ten months of import cover is essential for the stability of a currency.
Source
The Hindu.