How does a Central Bank act as a custodian of foreign exchange reserve?
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And now we give you the correct answer:
The Central bank exercises control over the foreign reserves to meet the deficit in the balance of payments and to maintain the international liquidity. In India, the RBI is the custodian of the country’s foreign exchange reserves. It buys and sells rupees as well as foreign currency in the foreign exchange market to maintain the stability exchange rate.
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