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• The Reserve Bank of India (RBI) is the custodian of the country’s foreign exchange reserves and is vested with the responsibility of managing their investment. The basic parameters of the Reserve Bank’s policies for foreign exchange reserves management are safety, liquidity and returns. The legal provisions governing management of foreign exchange reserves are laid down in the RBI Act, 1934. In brief, the law broadly permits the following investment categories: update scenario 
  
  a) deposits with other central banks and the BIS;
  
  b) deposits with commercial banks overseas;
  
  c) debt instruments representing sovereign/sovereign-guaranteed liability with residual maturity for the debt papers not exceeding 10 years;
  
  d) other instruments / institutions as approved by the Central Board of the RBI in accordance with the provisions of the Act;
  
  e) Investment, sale, purchase and deposits in gold; and
  
  f) dealing in certain types of derivatives.
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• While safety and liquidity continue to be the twin-pillars of reserves management, return optimisation has become an embedded strategy within this framework. The Reserve Bank has framed policy guidelines stipulating stringent eligibility criteria for issuers, counterparties, and investments to be made with them to enhance the safety and liquidity of reserves. The Reserve Bank, in consultation with the Government, continuously reviews the reserves management strategies.
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• In the RBI, the work related to the reserves management is handled in the Department of External Investments and Operations (DEIO).