Importance features of SDRs


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Importance features of SDRs are:

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  1. The special drawings rights are over and above the ordinary or general drawing rights. In other words, they are additional rights.
  2. The special drawing rights are not available for ordinary commercial uses, i.e., for buying goods and services in other countries. They are meant for use only by the central bank of a member country for meeting the balance of payments deficit.
  3. There are certain restrictions on the use of SDRs by the participating members. They are:

i.    A member country can use its SDR’s only when it faces a deficit in its balance of payments SDR’s cannot be used for ordinary commercial purposes.

ii.    A member country can, normally, use only 70% of its SDR allocations in a year. In case a greater proportion of SDR allocation has been used by a country in any one year.

iii.    A country which receives SDRs in exchange for convertible currencies is also required to provide convertible currencies only upto a certain limit.

iv.    A country whose holdings of SRDs are in access of its cumulative allocations is entitled to interest on the excess, while a country, which has deficiency of SDRs, is required to pay interest on the deficit.

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We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

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