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Foreign Exchange Reserves:
News:
- India’s foreign exchange reserves crossed $500 billion for the first time as the Reserve Bank of India builds up a war chest.
More in the news:
- India’s forex reserves surged by $8.2 billion during the week ended June 5.
- It is the biggest weekly jump since September 2007.
- The increase in reserves was mainly due to a rise in foreign currency assets.
- According to the Currency dealers, the sharp increase was due to:
(1) Gains from both currency revaluation (as the dollar depreciated against major currencies)
(2) Dollar mop-up through intervention by the central bank.
- India now has reserves to meet an import cover of about 14 months.
- The rupee has been the worst performer among emerging market currencies since the COVID-19 outbreak was declared a pandemic in March.
About Forex Reserves:
- Foreign exchange reserves are reserve assets held by a central bank in foreign currencies.
- 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.