Abstract

The Reserve Bank of India (RBI) manages Indias foreign exchange reserves which are crucial for maintaining economic stability and ensuring confidence in the countrys financial system. These reserves are composed of foreign currency assets gold reserves Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF) and Reserve Tranche Position (RTP) with the IMF. The primary objectives of holding foreign exchange reserves include: - Stabilizing the National Currency: The reserves help stabilize the Indian Rupee (INR) by providing liquidity to manage exchange rate volatility. - Supporting Import Payments: They ensure that the country can meet its import obligations and service external debt helping to avoid balance of payments crises. - Boosting Investor Confidence: Adequate reserves build confidence among foreign investors and lenders reflecting economic stability. - Facilitating Economic Policy: Reserves provide a buffer against external shocks and enable the RBI to i