Please check explanation of 3rd point as the component of capital account of BOP.

Dear Student, The explanation given in the image is correct. Although, I am defining the foreign exchange reserve:- The foreign currency assets held by the central bank of a particular country are referred as foreign exchange reserves. Keeping these reserves provides a country with higher credit worthiness to repay its foreign liabilities and vice-versa. These reserves are used for payment of international debts associated with foreign trade, investments, and other operations. If you have any problem regarding the same. Revert back. Regards