BANKING AFFAIRS

Detailed explanation-1: -India followed this system in 1862-1920. The object of fixed fiduciary system was to ensure absolute convertibility of note-issue and to regulate the paper currency so as to avoid inflation and equate the internal and external values of the currency.

Detailed explanation-2: -The Fixed Fiduciary System: This is one of the oldest systems of controlling note-issues. Under this system, a country can issue a certain quantity of notes without any reserve, i. e., without gold or silver backing.

Detailed explanation-3: -The Minimum Reserve System is the currency issue system followed by the RBI at present. It was adopted in 1956.

Detailed explanation-4: -The RBI follows the minimum reserve system, wherein it has to maintain a minimum quantity of gold bullion as reserves to issue currency.