Foreign currency assets, expressed in dollars, comprise the effect of appreciation or depreciation of non-US units such as the Euro, Pound, and yen held in foreign exchange reserves. According to the statistics, India’s reserve position with the International Monetary Fund decreased by $3 million in the reporting week to around $5.23 billion.
As part of its attempts to improve openness and disclosure, the Reserve Bank of India releases half-yearly reports on the management of foreign currency reserves.
These reports are generated semi-annually regarding the position at the end of March and the end of September of each year. The current information, i.e. 36th in the series, is based on the back of March 2021.
The report is split into two sections: Part I provides information on the movement of foreign exchange reserves, external obligations concerning funds, reserve adequacy, and other events during the half-year under consideration.
Part II discusses reserve management objectives, legislative provisions, risk management procedures, and the R.B.I.’s reserve management openness and disclosure standards.
According to R.B.I. data, the country’s foreign exchange reserves increased by $2.039 billion to $639.516 billion in the week ending October 8. The funds had fallen by $1.169 billion to $637.477 billion in the previous week, which concluded on October 1.
In the week ending September 3, reserves increased by $8.895 billion to a career-high of $642.453 billion.
The gain in reserves was due to an increase in Foreign Currency Assets (F.C.A.s) for the reporting week ending October 8, according to Reserve Bank of India (R.B.I.) weekly statistics issued on Friday.
According to the statistics, F.C.A.s grew by $1.55 billion to $577.001 billion within the same period. F.C.A.s contain assets like U.S.U.S. government notes issued by the central bank in foreign currencies, and it accounts for a sizable portion of the entire currency reserve.
F.C.A.s accounts for the effect of non-US currency appreciation or depreciation on foreign exchange reserves, such as the Euro, Pound, and yen.
For the week ending October 8, gold reserves increased by $464 million to $38.02 billion.
According to the statistics, India’s reserve position with the International Monetary Fund decreased by $3 million in the reporting week to around $5.23 billion.
 Objectives of Reserve Management
India’s foreign exchange reserve management aims are similar to those of many other central banks worldwide.Â
The requirement for foreign exchange reserves can vary considerably depending on a variety of factors, including the country’s exchange rate regime, the amount of openness of the economy, the share of a country’s G.D.P. that comes from the external sector, and the type of markets that exist in the country.Â
While safety and liquidity are the significant objectives of reserve management in India, return optimization is also considered.
Management of Gold Reserves
The Reserve Bank had 695.31 metric tonnes of gold as of the end of March 2021. While 403.01 metric tonnes of gold are stored in safe custody with the Bank of England and the Bank of International Settlements (BIS), 292.30 tonnes of gold are held in the United Kingdom.Â
In terms of value (USD), gold’s proportion of total foreign exchange reserves fell from approximately 6.69% at the end of September 2020 to roughly 5.87% at the end of March 2021.
Investment Pattern of the Foreign Currency Assets (F.C.A.)
Foreign currency assets include multi-currency assets maintained in multi-asset portfolios per current rules that adhere to the best international practices in this respect.Â
As of the end of March 2021, USD 359.88 billion of the entire F.C.A. of USD 536.69 billion had been invested in securities. USD 153.39 billion had been deposited with foreign central banks and the BIS, and the remaining USD 23.43 billion had been placed with commercial banks overseas.
 Review of Growth of Foreign Exchange Reserves
Reserves grew from USD 544.69 billion at the end of September 2020 to USD 576.98 billion at the end of March 2021 over the half-year period under review.
Although the U.S.U.S. dollar and the Euro are intervention currencies, and the Foreign Currency Assets (F.C.A.) are held in major currencies, the foreign exchange reserves are priced and represented in U.S.U.S. dollars.Â
Movements in the F.C.A. are primarily caused by the R.B.I.’s purchase and sale of foreign exchange, revenue from the deployment of foreign exchange reserves, Central Government external aid receipts, and fluctuations due to asset revaluation.
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