Management of Foreign Exchange Reserves
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Central Banking (Elective) — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the correct hierarchy of objectives that governs how RBI invests India's foreign exchange reserves?
The RBI prioritizes safety first, then liquidity, and finally returns when managing foreign exchange reserves.
What is the Currency and Gold Revaluation Account (CGRA) used for by RBI?
To absorb gains or losses from exchange rate and gold price movements.
Which institution is responsible for holding and managing India's foreign exchange reserves?
The Reserve Bank of India (RBI) holds and manages India's foreign exchange reserves.
Where are gains or losses on FCA and gold valuation booked under RBI's accounting framework?
Under a balance sheet head called Currency and Gold Revaluation Account.
Why is safety considered the most important objective in RBI's reserves management policy?
Safety is paramount because the reserves must be available without risk of loss, ensuring the nation can meet its international obligations at all times.
What was the total FCA of RBI as at end-March 2022?
USD 540.72 billion total Foreign Currency Assets.
What does the liquidity objective mean in the context of India's foreign exchange reserves management?
Liquidity means the reserves must be readily convertible and accessible so that India can use them quickly for balance of payments support or intervention without delay.
How much of RBI's FCA was invested in foreign securities as at end-March 2022?
USD 363.03 billion was invested in foreign securities.
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