BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Proportional Fiduciary System
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Fixed Fiduciary System
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Minimum Reserve System
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Minimum Fiduciary System
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Detailed explanation-1: -In the system of currency notes, which system is followed in India? Proportional reserve system.
Detailed explanation-2: -The RBI follows the minimum reserve system, wherein it has to maintain a minimum quantity of gold bullion as reserves to issue currency.
Detailed explanation-3: -Under the fixed fiduciary system, the central bank is authorized to issue only a fixed amount of currency note against government securities of a prescribed amount fixed by all and all issue in excess of this limit should be fully backed by gold and silver reserves.
Detailed explanation-4: -Under note-issue, the RBI issues currency notes in a targeted manner to ensure adequate supply of currency as well as to maintain price stability. While issuing currency notes, the RBI procures certain assets like government securities and foreign currencies.
Detailed explanation-5: -The central bank is required to keep 100% gold reserves beyond the fiduciary limit. The fiduciary limit is raised from time to time with the expansion of trade and industry. This system was introduced in England in 1844, in India in 1860, followed by Japan and Norway.