- RBI is the custodian of the country’s foreign exchange reserves.
- It is responsible for managing their investment.
- Legal provisions are in the RBI Act 1934.
- RBI invests reserves in deposits with international banks and debt instruments.
- The basic parameters are safety, liquidity, and returns.
- It assesses reserves adequacy based on import cover and external shocks.
- The objective is to align reserves with economic growth potential and capital flows.