India's Forex reserves reaches $279.24 billion

The foreign exchange (forex) reserve of India rose by $1.51 billion to touch $279.24 billion for the week ended October 11, 2013.

According to the Reserve Bank of India (RBI), India’s Foreign Currency Assets (FCA), the biggest component of the forex reserves, increased by $1.52 billion to $250.85 billion in the same week.

As per the central bank the FCA expressed in US dollar terms included the effect of appreciation or depreciation of non-US currencies held in reserve, such as the pound sterling, euro and yen. The value of India’s gold reserves remained the same.

However, India’s reserve position with the International Monetary Fund (IMF) decreased by $4.7 million to $2.19 billion and the value of the Special Drawing Rights (SDRs) plunged by $9.6 to $4.43 billion.

What are Special Drawing Rights (SDR)?

SDR which are also called paper gold are international financing instrument created by the International Monetary Fund (IMF) in 1969 to coincide with the disfavor of the US dollar as the principal currency of the world trade. Although called paper gold, an SDR is neither paper nor gold but an accountingentry.

It is not backed by any currency or precious metal, and is used only among governments and IMF for balanceofpayments settlements.

SDRs are a measure of a country’s reserve assets with IMF and, whereas not ‘money’ in the strict sense, have several characteristics of money as interestbearing assets, store of value, and means of settling indebtedness. They are distributed among all member nations of IMF in proportion to each member’s quota of IMF dues based on the member’s GNP.

SDRs are used mainly to supplement gold and convertible (hard) currencies in maintaining stability of foreign exchange markets and are valued on the basis of the value of a basket of 16 major currencies with periodically adjusted weightage reflecting each currency’s importance in international trade.

Month: Current Affairs - October, 2013