foreign exchange reserves is subject to international best practices and disclosure standards and traditionally vests with the central banks or monetary authorities of the country. the distinction between stabilisation funds and swfs is not very clear in practice but, for analytical purposes, such a distinction is useful. the accepted definition of foreign exchange reserves includes external assets that are readily available to and controlled by monetary authorities for direct financing of payments imbalances, for indirectly regulating the magnitude of such imbalances through intervention in foreign exchange markets to affect the currency exchange rate, and / or for other purposes. to meet this definition, reserve assets need to be liquid or marketable foreign currency assets that are under the effective control of, or “ useable ” by, the reserve manager and held in the form of convertible foreign currency claims on non - residents. the management of the foreign exchange reserves is typically the preserve of the central bank or the monetary authority of the country. stabilization funds, or commodity funds, are augmented mainly by “ windfalls ” from commodity exports, more commonly petroleum. these funds may invest in a wider range of assets than those in which the central bank would invest the foreign exchange reserves. however, considerations of liquidity and moderate risk are also relevant because stabilization funds may be drawn upon when such “ windfalls ” disappear and contingencies warrant. a stabilization fund is designed primarily to achieve medium - term macroeconomic stabilization objectives, arising out of domestic economic and financial effects of volatility in export earnings. however, if there are sustained “ windfalls ” on export front and consequently there is no draw down of funds, a stabilization fund may be converted into an endowment fund as done by norway by rechristening the petroleum fund as government pension fund. swfs generally refer to special purpose investment vehicles created to manage national savings to generate higher returns. the non - commodity swfs are usually carved out of the official reserves of a country. countries having large balance of payments surpluses have been able to transfer excess foreign exchange reserves to such investment vehicles. typically, countries that have set up swfs have surplus on the current account due to “ windfall ” or sustained current account surpluses, and usually a fiscal surplus as well. consistent with their objectives, the official foreign exchange reserves are generally deployed in low - risk liquid assets. typically these reserves are invested in debt instruments representing sovereign / sovereign - guaranteed liability, in deposits with other central banks, bank for international settlements ( bis ), supranationals and

central banks. india has a stake in the on - going debate by virtue of its increasing importance in the global capital flows. more generally, in india, we have been seeking comfort in respect of the nature of investment associated with capital inflows through hedge funds channels and participatory notes. similar issues could also be relevant in respect of private equity flows. while it is essential to recognize the public sector nature of the stabilisation funds and swfs that may be investing in india, it is also useful to study the evolving global practices of investee countries ’ approaches to these funds. at this moment, as mentioned in the foregoing, circumstances in india do not seem to warrant a serious consideration of establishing either a stabilisation fund or a swf. however, if and when such a consideration is given, it would be essential to put in place sound governance, transparency and accountability standards that would provide necessary comfort to the domestic fiscal and monetary authorities and, additionally, to the investee countries. i would like to thank the organizers for giving me the opportunity to share some of my views on a subject of emerging importance and in regard to which we have just begun the learning process. i wish the fedai ’ s golden jubilee celebrations a grand success. on the occasion of fedai's golden jubilee, i have the pleasure of presenting to fedai, on behalf of rbi, a set of commemorative coins brought out on the occasion of the 50th anniversary of india's independence. thank you.