Foreign Exchange Reserves (FOREX) | RBI

Foreign-exchange reserves (also called Forex reserves) are, in a strict sense, only foreign-currency deposits held by national central banks and monetary authorities. However, in popular usage and in the list below, it also includes gold reserves, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve position because this total figure, which is usually more accurately termed as official reserves or international reserves or official international reserves, is more readily available and also arguably more meaningful.

These foreign-currency deposits are the financial assets of the central banks and monetary authorities that are held in different reserve currencies (e.g. the U.S. dollar, the Euro, the Japanese Yen, Swiss Franc, Chinese Yuan, and the Pound Sterling) and which are used to back its liabilities (e.g. the local currency issued and the various bank reserves deposited with the Central bank by the government or financial institutions). Before the end of the gold standard, gold was the preferred reserve currency. Some nations are converting foreign-exchange reserves into sovereign wealth funds, which can rival foreign-exchange reserves in size.

India’s foreign exchange reserves comprise of:

(i) Foreign currency assets (FCA),

(ii) Gold, 

(iii) Special Drawing Rights (SDRs) and

(iv) Reserve tranche position (RTP) in the International Monetary Fund 

Foreign Currency Assets

• FCA are assets that are valued based on a currency other than the country’s own currency.
• FCA is the largest component of the forex reserve. It is expressed in dollar terms.
• FCA includes the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
• Currency appreciation refers to the increase in value of one currency relative to another in the forex markets.
• Currency depreciation is a fall in the value of a currency in a floating exchange rate system.
• In a floating exchange rate system, market forces (based on demand and supply of a currency) determine the value of a currency.

Special Drawing Rights (SDR):

• It is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
• It is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
• Its value is calculated from a weighted basket of major currencies, including the U.S. dollar, the euro, Japanese yen, Chinese yuan, and British pound. The Interest rate on SDRs or (SDRi) is the interest paid to members on their SDR Holdings.

Reserve Position in the International Monetary Fund:

• A reserve tranche position implies a portion of the required quota of currency each member country must provide to the International Monetary Fund (IMF) that can be utilized for its own purposes.
• It is basically an emergency account that IMF members can access at any time without Agreeing to Conditions or Paying a Service Fee.

Foreign Exchange Reserves (FOREX) of India

Foreign Currency Assets (FCA) [ RBI Deposits]
Year	Other Central Banks	Overseas Commercial Banks	Overseas Securities	Total
September 2020	$124.15 bn (24.72%)	$7.43 bn (1.4%)	$370.56 bn (73.88%)	$502.14 bn (100%)
March 2021	$153.29 bn (28.56%)	$23.42 bn (4.36%)	$359.87 bn (67.08%)	$536.69 bn (100%)

 

Gold Reserves of RBI
Year	Overseas	Domestic	Total Gold Reserves
March 2021	403.01 metric tonnes (57.96%)	292.30 metric tonnes (42.04%)	695.31 metric tonnes (100%)

 

Country	FOREX	As of
China	$3,362,471 mil	May 2021
Japan	$1,378,467 mil	April 2021
Switzerland	$1,070,369 mil	April 2021
India	$608,081 mil	June 2021
Russia	$604,800 mil	June 2021