DEFINITION of 'Reserve Tranche'

The proportion of the required quota of currency that each International Monetary Fund (IMF) member country must provide to the IMF, but can designate for its own use. The reserve tranche portion of the quota can be accessed by the member nation at any time, whereas the rest of the member's quota is typically unaccessible.

BREAKING DOWN 'Reserve Tranche'

Because IMF member nations have many different national currencies, the IMF denominates its members' quotas in terms of special drawing rights (SDRs), which is essentially a specified basket of major international currencies.

A certain proportion of a member country's quota is specified as its reserve tranche. The member country can access its reserve tranche funds at its discretion, and is not under an immediate obligation to repay those funds to the IMF. Member nation reserve tranches are typically 25% of the member's quota.

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