According to recently released Reserve Bank of India (RBI) data, India’s foreign exchange (forex) reserves has touched life-time high of US $426.42 billion after it surged by US $4.215 billion in the week to June 21, 2019. The rise in reserves was on account of increase in foreign currency asset, which is a major component of the overall foreign exchange reserves. In the reporting week, foreign currency assets increased by US $4.202 billion to US $398.649 billion. Earlier, India’s forex reserves had scaled record high of US $426.028 billion in the week to April 13, 2018.
Breakaway of forex reserves (in the reporting week)
They are reserve assets held by central bank of the country in foreign currencies. These reserve acts as buffer to be used in challenging times. They are also used as back liabilities and also to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant forex reserves.
Components of India’s FOREX Reserves: Foreign currency assets (FCAs), Special Drawing Rights (SDRs), Gold Reserves and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of India’s forex Reserves. It is expressed in dollar terms and includes effect of appreciation/depreciation of non-US units like euro, pound and the yen held in forex reserves.