Consider the following statements regarding Forex Reserve 1 Forex Reserves comprise of foreign curre...........

Indian Economic System(BPSC) External Sector

Consider the following statements regarding Forex Reserve:

1. Forex Reserves comprise of foreign currency assets and Special Drawing Rights only.

2. Recently India became the fourth largest forex reserves holder in the world.

3. An economy’s Reserve Tranche in the IMF is not a part of its forex reserve.

Which of the above statements is/are correct?

2 only

1 and 3 only

1 and 2 only

3 only

Foreign Exchange Reserves/Forex Reserves :

The total foreign currencies (of different countries) an economy possesses at a point of time is its ‘foreign currency assets/ reserves’.
The Forex Reserves of an economy is its ‘foreign currency assets’ added with its gold reserves, SDRs (Special Drawing Rights) and Reserve Tranche in the IMF.
Reserve Tranche is like an emergency account from which a portion of member country’s quota can be withdrawn without agreeing to conditions or paying a service fee.
In a sense, the Forex reserves are the upper limit up to which an economy can manage foreign currency in normal times if need be.
The adequacy of Forex Reserves is measured by Import Cover.