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India’s largest foreign exchange reserves
Mon, 20 Dec 2021

India’s largest foreign exchange reserves

  • Context: Ministry of Finance has recently stated that India currently has the fourth largest foreign exchange reserves in the world.
  • The forex reserve stood at USD 640.4 billion as on November.
  • Regarded as the health meter of a country, Foreign Exchange reserves or Forex reserves are assets that include foreign currencies, gold reserves, treasury bills, etc retained by a central bank or other monetary authority.
  • RBI is the custodian of the Foreign exchange reserves in India.
  • The biggest contributor to this reserve is foreign currency assets followed by the gold, SDR, and reserve with the International Monetary Fund.
  • Purpose of the Foreign Exchange Reserve:
  • It ensures that RBI has backup funds if the national currency rapidly devalues or becomes altogether insolvent.
  • A good stock of forex creates a good image at the international level among trading partners and helps in attracting foreign trade.

 

 

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