The role of central banks in the establishment and operations of these funds cannot be ignored. In some cases, central banks advise the government in the design and establishment of Stabilisation Funds or SWFs. In some other cases, they also operate as fund managers, but subject to formal principal-agent agreements.
In a few cases, the central bank creates a separate unit within itself to manage a fund. In view of the expertise and credibility, involvement of a central bank in such funds to a significant extent appears logical. In India, under the RBI Act, 1934, the Reserve Bank of India has been entrusted with the responsibility of managing the country’s foreign exchange reserves.