Foreign Exchange Reserves
Foreign currency assets, gold and reserve positions held by a central bank to meet external obligations and manage the currency.
Formula
Import Cover = Foreign Exchange Reserves / Average Monthly Imports, expressed in months
Unit
₹ crore
In depth
Reserves are the buffer that lets a central bank smooth currency volatility and meet external payments during a shock — India built them deliberately after the 1991 crisis, when cover had fallen to about three weeks of imports. Import cover, measured in months, is the standard adequacy metric, and levels above eight to ten months are considered comfortable. Reserves are held mostly in foreign government securities and gold, so their rupee value moves with both the exchange rate and those assets' prices. Using them to defend a currency works only against temporary pressure; sustained pressure exhausts them.
Worked example
Reserves of USD 650 billion against monthly imports of USD 62 billion give 10.5 months of import cover. In 1991 the equivalent figure was under one month, which is what forced the crisis response.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Foreign Exchange Reserves” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.