Foreign exchange reserves are:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → foreign assets held by the central bank of the country
Foreign exchange reserves are the foreign assets that the central bank holds. The RBI sells from them when there is a BoP deficit.
All currencies other than the rupee are foreign exchange, a wider idea. Loans from abroad and non-resident deposits are capital account items.
NCERT (2026-27): Glossary: “Foreign exchange reserves – Foreign assets held by the central bank of the country.” Glossary: “Foreign exchange – Foreign currency, all currencies other than the domestic currency of a given country.” |