Which of the following statements is/are correct? 1. Most of India's reserves is held in the form of foreign currency. 2. There is no cost of holding foreign currency as reserves by a nation.

Statement 1 is correct: India's foreign exchange reserves are predominantly held as Foreign Currency Assets (FCA), which typically constitute around 85–90% of total reserves; the remainder is held in gold, SDRs, and the Reserve Tranche Position with the IMF. Statement 2 is incorrect because holding foreign currency reserves has a real opportunity cost — the country forgoes higher domestic returns on alternative investments, and sterilisation operations to neutralise the monetary impact of reserve accumulation also impose fiscal and quasi-fiscal costs.