What do you mean by custodian of foreign reserve function of central bank?

Custodian of foreign exchange reserves The Central Bank is the custodian of country’s stock of gold and international currencies. The Central Bank maintains the stability of exchange rate. All earnings in foreign exchange transactions are to be deposited with the Central Bank and are routed through it.

What is custodian of foreign reserves?

The Reserve Bank of India, is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment.

How does a central bank act as a custodian of foreign exchange reserve?

The central bank controls both the receipts and payments of foreign exchange. 2. It tries to maintain stability of the exchange rate. For this purpose, it buys or sells foreign currencies in the market to minimise fluctuations in the foreign exchange rates.

Who is the custodian of foreign reserves of India?

In substantive terms, the Reserve Bank functions as the custodian and manager of forex reserves, and operates within the overall policy framework agreed upon with Government of India.

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Why is the central bank the custodian of the nation’s reserves of international currency?

Function 4 # Custodian of Foreign Balances:

It is the function of the central bank to maintain the exchange rate fixed by the government and manage exchange control and other restrictions imposed by the state. Thus, it becomes a custodian of nation’s reserves of international currency or foreign balances.

What are the supervisory functions of RBI?

The supervisory functions include giving license to banks along with their new branches, inspection of the assets and liabilities of the banks it regulates the financial position of the economy. It also issues directives and has the power to control Non- Bank Financial Institutions.

Who is the custodian of Indian Constitution?

The Supreme Court is the custodian of the Constitution of India and the higher judiciary has played a crucial role in supporting the separation of powers, an important feature of our democracy.

What is repo rate?

Repo rate is the rate at which the central bank gives loans to commercial banks against government securities. Reverse repo rate is the interest that RBI pays to banks for the funds that the banks deposit with it. So, if the repo rate increases, it means banks are getting funds from RBI at a higher cost.

Who propounded purchasing power parity exchange rate?

THE PURCHASING POWER PARITY

The purchasing power parity theory was propounded by Professor Gustav Cassel of Sweden. According to this theory, rate of exchange between two countries depends upon the relative purchasing power of their respective currencies.

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What is the foreign reserve of India?

India currently has the fourth largest foreign exchange reserves in the world, Minister of State for Finance Pankaj Chaudhary told Lok Sabha on Monday. As on November 19, 2021, he said the forex reserve stood at USD 640.4 billion.

What is the foreign exchange reserve of India?

India’s foreign exchange reserves fall to $635.9 b.

What are the functions of central bank?

Functions of the Central Bank

  • Currency regulator or bank of issue.
  • Bank to the government.
  • Custodian of Cash reserves.
  • Custodian of International currency.
  • Lender of last resort.
  • Clearing house for transfer and settlement.
  • Controller of credit.
  • Protecting depositors interests.

What is the meaning of foreign reserve?

‘Foreign reserves’ refers to foreign currency that a government or central bank holds. … Foreign reserves may include treasury bills, bonds, bank deposits, banknotes, and other government securities. Some people include IMF funds or gold reserves.