Forex reserves are assets held on reserve by a central bank (RBI) in foreign currencies like dollar, which can include bonds, treasury bills and other government securities.

Need To Know

• They are an important component of the Balance of Payment (BoP)
• Components of India’s Forex Reserves
  • Foreign Currency Assets (FCA) (largest contributor)
  • Gold reserves (second largest contributor)
  • Special Drawing Rights: It is not a currency but its value is determined by a basket of 5 major currencies: the US dollar, euro, Chinese renminbi, Japanese yen, and British pound sterling.
  • Reserve Tranche Position (RTP) with the IMF : RTP is a country’s quota-based access to IMF resources, available for borrowing without strict conditions, used for BoPs or financial stability.

Source: The Indian Express