Question

The foreign exchange reserve of India consists of _________

• A. The foreign currency assets held by RBI and the gold holding of RBI
• B. The gold holding of RBI and special drawing rights
• C. The gold holding of RBI, the foreign currency assets held by RBI and special drawing rights
• D. Only the foreign currency assets held by RBI

Answer 1

The Correct Option is C

The foreign exchange reserve of India is a crucial aspect of its economic structure, and it is composed of several key elements: 

1. Foreign Currency Assets (FCA): These are the largest component of the reserves and consist of assets like US dollars, the Euro, UK pound sterling, and Japanese yen held by the Reserve Bank of India (RBI). It reflects the value of foreign currency deposits and bonds held by the country's central bank.
2. Gold Holdings: As a part of the diversification strategy and security, the RBI holds substantial quantities of gold as reserves.
3. Special Drawing Rights (SDR): These are international reserve assets created by the International Monetary Fund (IMF) and allocated to member countries to supplement their existing reserves. This serves as a potential claim on the freely usable currencies of IMF member countries. The value of SDR is calculated based on a basket of major international currencies.

The correct answer is: The gold holding of RBI, the foreign currency assets held by RBI and special drawing rights, as it comprehensively lists all components of India's foreign exchange reserves.