During COVID era, India’s forex reserves crossed $600 mark for the 1st time and as on 4th June, it stood at $605 billion. With this, India equals Russia as the 4th largest reserve holder worldwide.

  • India’s forex reserve was $605.008 billion while for Russia it was $605.2 billion.
  • It took a year for reserves to rise by $100 billion.
  • Huge forex reserves have improved India’s import cover substantially.
  • By December 2020, foreign exchange reserves cover of imports increased to 18.6 months.

Foreign exchange or Forex reserves

The Forex are assets on reserves which are held by central bank in foreign currencies. It includes bonds, treasury bills and other government securities. Most of the foreign exchange reserves are held in USD. These reserves serve several purposes and ensure that central bank has backup funds in case national currency rapidly becomes insolvent or devaluate. India’s Forex Reserves include- Gold, Foreign Currency Assets, Special Drawing Rights and Reserve position with International Monetary Fund.

Foreign Currency Assets

The Foreign Currency Assets which are valued on the basis of currency other than own currency of any country are called as foreign currency assets. It is the largest component of forex reserve and is expressed in dollar terms.

Special Drawing Rights

The Special Drawing Rights is an international reserve assets are created by International Monetary Fund in the year 1969.  These are neither a currency nor a claim on IMF, but a potential claim on freely usable currencies of members of International Monetary Fund.

India becomes 4th largest Forex Reserves holder India becomes 4th largest Forex Reserves holder