6. What is foreign exchange reserve?
Foreign exchange reserves (also called Forex reserves) are the foreign currencies held by a country's central bank and its member banks. They are also referred to as foreign currency reserves or foreign reserves. The reserves are labeled as reserve assets under assets by functional category. In terms of financial assets classifications, the reserve assets can be classified as Gold bullion, Unallocated gold accounts, Special drawing rights, currency, Reserve position in the IMF, interbank position, other transferable deposits, other deposits, debt securities, loans, equity (listed and unlisted), investment fund shares and financial derivatives, such as forward contracts and options.
