- RBI is the custodian of the country’s foreign exchange reserves.
- It is vested with the responsibility of managing their investment.
- Legal provisions are laid down in the RBI Act 1934.
- RBI invests reserves in deposits with international banks and debt instruments.
- Its policies prioritize 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.