Mint explains this development and the importance of forex reserves.What are forex (foreign exchange) reserves?Forex or foreign exchange reserves are essentially assets held by the central bank in foreign currencies as a reserve.
They are usually used for backing the exchange rate and influencing monetary policy. In the case of India, our forex reserves include dollars, gold, and the International Monetary Fund’s quota for Special Drawing Rights.
Most of the reserves are usually held in US dollars given the currency’s importance in the international trading and financial system.