India’s foreign exchange reserves (forex) have surged by 3.615 billion dollars to touch a fresh lifetime high of 555.12 billion dollars in the week ended October 16, 2020.
- Foreign currency assets (FCA), a major part of the overall reserves, increased by 3.539 billion dollars to 512.322 billion dollars. Expressed in dollar terms, FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
- Gold reserves went up by 86 million dollars in the reporting week to reach 36.685 billion dollars.
- The country’s special drawing rights with the International Monetary Fund remained unchanged at 1.480 billion dollars; while reserve position with the IMF declined by 11 million dollars to 4.634 billion dollars.
- The major reason for the rise in forex reserves is the rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs).
What constitutes Forex of India?
- Forex reserves are external assets in the form of gold, SDRs (special drawing rights of the IMF), foreign currency assets (capital inflows to the capital markets, FDI and external commercial borrowings) and Reserve Tranche Position, RTP (Reserve Position in the International Monetary Fund ) .
- The RBI Act, 1934 provides the legal framework for deployment of reserves in different foreign currency assets and gold
- Almost 64 per cent of the foreign currency reserves are held in securities like Treasury bills of foreign countries, mainly the US; 28 per cent is deposited in foreign central banks; and 7.4 per cent is deposited in commercial banks abroad.
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