Indian Economy

Which one of the following groups of items is included in India's foreign-exchange reserves?

  1. Foreign-currency assets, loans from the World Bank and SDRs
  2. Foreign-currency assets, gold holding of the RBI and loans from the World Bank
  3. Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries
  4. Foreign-currency assets, gold holdings of the RBI and SDRs

Answer

Foreign Exchange Reserves are deposits of a foreign currency held by a central bank (RBI in case of India). Holding the currencies of other countries as assets allow governments to keep their currencies stable and reduce the effect of economic shocks.

The correct option is D.