The monetary authority in India, viz Reserve Bank of India, is bound to maintain a reserve against the notes issued, whatever may be the amount. This system is called as

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Minimum Reserve System
B	Proportional Reserve System
C	Maximum Fiduciary Issue System
D	Simple Deposit System

Explanation:

Detailed explanation-1: -The RBI’s current currency-issuing system is known as the Minimum Reserve System. It was passed into law in 1956. The RBI is required to retain a minimum reserve of an amount of about Rs 200 crores in foreign currencies, gold coins, and gold bullion under the Minimum Reserve System.

Detailed explanation-2: -Monetary Authority: Formulates, implements and monitors the monetary policy. Objective: maintaining price stability while keeping in mind the objective of growth.

Detailed explanation-3: -The Reserve Bank has introduced banknotes in the Mahatma Gandhi Series since 1996 and has so far issued notes in the denominations of Rs. 5, Rs. 10, Rs. 20, Rs.

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.

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