The SDR (Special Drawing Rights) is an international reserve asset created by the IMF as a supplementary international reserve asset in 1969. The SDR serves as the unit of account of the IMF and other international organizations.

The SDR is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The SDR asset holders can exchange for currency when needed.

The IMF originally defined the SDR as equivalent to a fractional amount of gold equivalent to one US dollar. This arrangement was when fixed exchange rates of currencies tied to the price of gold and the US dollar were the leading international reserve asset.

IMF redefined the SDR in 1973, when fixed exchange rates ended, as equivalent to the value of a basket of world currencies the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

Individuals and private entities cannot hold SDRs. IMF members – and the IMF itself – hold SDRs and the IMF has the authority to approve other holders, such as central banks and multilateral development banks. However, individuals and private entities cannot hold SDRs.

As of February 2023, there were 20 organizations approved as prescribed holders. Participating members and prescribed holders can buy and sell SDRs. However, prescribed holders do not receive allocations of SDRs, and they may not request an exchange of SDRs in transactions with designation as members do.

Surendra Naik

Share
Published by
Surendra Naik

Recent Posts

Features of a Computerized Accounting System

Accounting is a multifaceted discipline. It caters to the diverse informational needs of stakeholders within…

13 hours ago

What is the meaning of computerized accounting?

As the name says ‘computerised accounting’ is the use of computers, software, and hardware to…

2 days ago

Supreme Court overrules capping of Credit card charges

The Supreme Court today overruled a 2008 decision by the National Consumer Disputes Redressal Commission…

3 days ago

Preparation and Presentation of Financial Statements of Banks

The Bank’s financial statements are prepared under the historical cost convention, on the accrual basis…

3 days ago

Accounting Treatment of Specific Items under accounting policies of banks

The term "accounting treatment" represents the prescribed manner or method in which an accountant records…

3 days ago

Explained: Disclosures Prescribed by RBI under Basel-III

The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the…

4 days ago