Special Drawing Rights (SDR) and the IMF reserve tranche: notes for bank exams

At a glance

The Special Drawing Right (SDR) is an international reserve asset created by the IMF. It is not a currency, but a claim that a country can swap for dollars, euros or other usable currencies. The reserve tranche position is the part of a country's IMF quota it can draw back at any time without conditions. Both are two of the four parts of India's foreign exchange reserves.

Key facts

SDR created: 1969, by the IMF
SDR basket: US dollar, euro, Chinese renminbi, Japanese yen, British pound
Weights (from 1 August 2022): dollar 43.38%, euro 29.31%, renminbi 12.28%, yen 7.59%, pound 7.44%
Renminbi added: 2016 (decided in the 2015 review)
Basket review: every five years; the next is due by end-July 2027
Biggest allocation: about SDR 456 billion (about US$650 billion), effective 23 August 2021
India's share of the 2021 allocation: SDR 12.57 billion (about US$17.86 billion)
India's IMF quota: SDR 13,114.4 million (2.75% of the total)
India's SDRs (16 Oct 2026): US$18.58 billion
India's reserve tranche position (16 Oct 2026): US$4.79 billion

How it works

India's forex reserves have four parts.

Component	Size on 16 Oct 2026
Foreign currency assets	US$591.85 bn
Gold	US$105.80 bn
SDRs	US$18.58 bn
Reserve tranche position in the IMF	US$4.79 bn
Total	US$721.02 bn

How SDRs are created. The IMF makes "general allocations" to members in proportion to their quotas. A country can hold its SDRs as reserves or exchange them with other members for hard currency. The SDR interest rate is set weekly from three-month money-market rates of the basket currencies. The SDR is also the IMF's unit of account: quotas and loans are expressed in SDRs.

Reserve tranche. About a quarter of a member's quota is paid in reserve assets. That portion, plus any amount the IMF has used from the member's currency, forms the reserve tranche. Drawing it is not a loan, carries no conditions and is counted as part of the member's reserves.

Why SDR values move weekly. India reports SDRs in US dollars, so their dollar value changes with the exchange rates of the basket currencies even when the number of SDRs held is unchanged.

Timeline

1969: SDR created
2009: general allocation of about SDR 161 billion after the global financial crisis
2016: renminbi joins the basket
2021: record allocation of about SDR 456 billion (COVID-19)
2022: basket weights revised (effective 1 August)

Recent developments

16 Oct 2026: Total reserves fell to US$721.02 bn; SDRs stood at US$18.58 bn and the reserve tranche at US$4.79 bn (RBI data released 23 October). Reserves are about US$65 bn below the 4 September record of US$785.7 bn.
2 Oct 2026: Reserves at US$734.6 bn, with SDRs at US$18.7 bn.
25 Sep 2026: Reserves fell US$18.3 bn in a week to US$747.6 bn.

Exam traps

The SDR is a reserve asset, not a currency, and the IMF does not print it as notes.
The basket has five currencies; the Indian rupee is not one of them.
The order of weights is dollar > euro > renminbi > yen > pound.
The largest part of India's reserves is foreign currency assets; the smallest is the reserve tranche.
Drawing the reserve tranche is not IMF borrowing.

Quick check

Q: When did the IMF create the SDR? A: 1969.
Q: Which currency has the third-largest weight in the SDR basket? A: The Chinese renminbi (12.28%).
Q: What are the four components of India's forex reserves? A: Foreign currency assets, gold, SDRs and the reserve tranche position in the IMF.

Sources

In the news

Every time this topic has appeared in our current affairs, newest first:

Week of 15–21 October 2026Forex reserves fall US$5.0 bn to US$721.0 bn (week ended 16 October)
Week of 8–14 October 2026Forex reserves fall USD 12.95 billion to USD 734.6 billion
Week of 1–7 October 2026Forex reserves fall US$18.3 bn to US$747.6 bn