Question

What are official reserve transactions? Explain their importance in the balance of payments.

Answer 1

Hey there !!

Official reserve transactions ..

√ The overall balance is reflected in official reserve transactions , because RBI is the custodian of foreign reserves of country..

√ It is shown as a part of capital account in balance of payment ..

√ It is the account showing foreign reserves with RBI..

Importance in BOP..

It shows the equilibrium or Disequilibrium in economy..

+ be sign in official reserve transactions shows surplus in balance of payment

-ve sign in that shows deficit in BOP

Thank you

Answer 2

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When the official reserves increases or decreases, it is called overall balance of payments surplus or deficit respectively

@@ The overall balance is reflected in official reserve transactions , because RBI is the custodian of foreign reserves of country..

@@It is shown as a part of capital account in balance of payment ..

@@It is the account showing foreign reserves with RBI..



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