According to latest International Monetary Fund (IMF) guidelines, reserve management should seek to ensure that (1) adequate foreign exchange reserves are available for meeting a defined range of objectives; (2) liquidity, market, credit, legal, settlement, custodial, and operational risks are controlled in a prudent manner; and (3) subject to liquidity and other risk constraints, reasonable risk-adjusted returns are generated over the medium to long term on the funds invested.
The broad objectives of reserve management in India runs on similar lines. While liquidity and safety constitute the twin objectives of reserve management in India, return optimisation is kept in view within this framework.