As a part of prudent management of external liabilities, the RBI policy is to keep forward liabilities at a relatively low level as a proportion of gross reserves and the emphasis on prudent reserve management i.e., keeping forward liabilities within manageable limits, was highlighted in the RBI’s Annual Report, 1998-99.
The RBI Annual Report, 1999-2000 stated that the overall approach to management of India’s foreign exchange reserves reflects the changing composition of balance of payments and liquidity risks associated with different types of flows and other requirements and the introduction of the concept of liquidity risks is noteworthy.