Forex Reserves MCQ — 2 Practice Questions with Answers

Explanation

The Gold Reserves component was the main driver of the 9.063 billion dollar rise, surging by 7.221 billion dollars to 120.742 billion dollars on account of RBI gold purchases and a sharp rise in international gold prices amid safe haven demand linked to the West Asia conflict. Foreign Currency Assets rose by a smaller 1.784 billion dollars. External commercial borrowings are not a component of forex reserves at all. The four components are FCA, Gold, SDRs and Reserve Tranche Position.

Explanation

India's forex reserves, as compiled by the RBI, have four components: Foreign Currency Assets (the largest, comprising investments in foreign currency denominated assets), Gold Reserves (held by the RBI), Special Drawing Rights (SDRs, the international reserve asset created by the IMF), and Reserve Tranche Position (India's quota with the IMF which it can draw on without conditions). Each of these is reported in the RBI's Weekly Statistical Supplement.