While internal stability implies that reserve management cannot be isolated from domestic macroeconomic stability and economic growth, the phrase ‘to use the currency system to the country’s advantage’ implies that maximum gains for the country as a whole or the economy in general, could be derived in the process of reserve management7. 29.
The Reserve Bank of India Act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets (FCA) and gold within the broad parameters of currencies, instruments, issuers and counterparties. The relevant provisions are contained in Section 17 and 33 of the Act.