BANKING AFFAIRS

Detailed explanation-1: -The Correct Answer is a credit system granted by IMF to its members. The IMF is funded through its members and their quota contributions. The reserve tranche is basically an emergency account that IMF members can access at any time without agreeing to conditions or paying a service fee.

Detailed explanation-2: -Reserve tranche is the component of a member country’s quota with the IMF that is in the form of gold or foreign currency. For any member country, out of the total quota, 25% should be paid in the form of foreign currency or gold. Hence this is called as reserve tranche or gold tranche.

Detailed explanation-3: -noun. the quota of 25 per cent to which a member of the IMF has unconditional access. Prior to 1978 it was paid in gold and known as the gold tranche. Collins English Dictionary.

Detailed explanation-4: -A reserve tranche position (known as the gold tranche position before the Second Amendment of the Articles) is defined as the amount by which a member’s quota exceeds the holdings of its currency by the Fund, excluding those holdings representing the member’s use of Fund credit.

Detailed explanation-5: -Reserve Tranche Position is accounted among a country’s foreign-exchange reserves. Part of the quota can be withdrawn from the IMF without any interest during critical situations of a country such as Balance of Payment (BOP) crises. This part of the money which can be withdrawn without any interest is the RTP.