In BOP account, there is third category (besides current account and capital account) called Official Reserve Account which records transactions of RBI. The country could engage in official reserve transactions i.e., running down in reserves of foreign exchange in case of deficit by selling foreign currency in the foreign exchange market. The decrease.(increase) in official reserves is called overall balance of payment deficits (surplus). The basic premise is that the monetary authorities are the ultimate financiers of any deficit in BOP (or recipients of any surplus).
