Finance, Forex and Investments

When $1 is exchanged at Rs. 45, does it mean RBI holds $1 in reserve for every Rs 45 in circulation?

If the exchange rate of INR is 1$ = Rs 45, then does it mean that Reserve bank of India keeps $1 in its reserve for every Rs 45 in circulation?

Public Comments

1. No, not necessarily. Remember, the Money Exchanges across the country represent the currency market and just like any other shop it is a product and has no link with Foreign Exchange reserves of the R.B.I. Among all the assets of the R.B.I that back the amount of Indian Rupees , it includes Gold and Foreign Currency reserves like Dollars. And remember, whenever the public buys foreign currencies from exchanges, it is through the Indian Rupees already in circulation.
2. yes