Custodian of National Reserves of International Currency

The Reserve Bank of India (RBI) is the custodian of national reserves of international currency. The RBI is the central bank of India, responsible for regulating the country's monetary and financial system. It plays a crucial role in maintaining the country's foreign exchange reserves, which are essential for international trade and economic stability.

Functions of RBI as custodian of national reserves of international currency:

1. Maintaining Foreign Exchange Reserves: The RBI holds and manages India's foreign exchange reserves, which consist of various foreign currencies, gold, and Special Drawing Rights (SDRs) allocated by the International Monetary Fund (IMF). These reserves are used to finance the country's imports and debt obligations, and to maintain the stability of the rupee in the foreign exchange market.

2. Managing Exchange Rate: The RBI manages the exchange rate of the Indian rupee against other major currencies. It intervenes in the foreign exchange market to buy or sell foreign currencies to maintain the desired exchange rate level.

3. Regulating Foreign Exchange Transactions: The RBI regulates all foreign exchange transactions in India, including imports, exports, and remittances. It also sets the guidelines for foreign investment in the country.

4. Representing India in International Financial Institutions: The RBI represents India in various international financial institutions, such as the IMF, World Bank, and Asian Development Bank. It participates in the decision-making process of these institutions and helps to shape global economic policies.

Conclusion

In summary, the RBI plays a crucial role as the custodian of national reserves of international currency. It manages India's foreign exchange reserves, regulates foreign exchange transactions, maintains exchange rate stability, and represents India in international financial institutions. These functions are essential for maintaining the country's economic stability and promoting international trade and investment.