With the global economy gradually recovering, RBI has started moving back to foreign commercial banks to deploy its forex (foreign exchange) reserves.

Last year, after the sub prime crisis, RBI had withdrawn funds from these foreign banks and moved them to safer and more liquid avenues like the Bank of international settlements (BIS)and
The international monetary fund (IMF).

BIS has its head office in Basel, Switzerland and acts as a bank for all the central banks. BIS only provides financial services to the central banks. Any private individual or corporate entity is not entertained.

But the bank has again started moving back to foreign commercial banks where they can earn higher rates of interest. The assets held with the foreign commercial banks increased from $4729 million in February this year to $5092 million in July.

The latest RBI annual report revealed that the foreign currency assets are invested in multi-currency and multi market portfolios.

As far as RBI is concerned, the foreign currency assets are mostly expressed in dollars. Besides dollars, the SDR (Special drawing rights) basket includes currencies like pound, euro and Yen. The valuation of the SDR basket is done by adding he values in U.S. dollars, based on market exchange rates, of a basket of major currencies (like the U.S. dollar, Euro, Japanese yen, and pound sterling). The SDR currency value is calculated daily and the valuation basket is reviewed and adjusted every five years.

In addition there is a small, diversified, non-SDR portfolio. However no central bank discloses the currency composition of its reserves.