GK
BANKING AWARENESS AND SEBI
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Proportional Reserve System
|
|
|
Minimum Reserve System
|
|
|
Maximum Reserve System
|
|
|
None of the above
|
Detailed explanation-1: -For currency issuance, the RBI presently employs the Minimum Reserve System. It was first used in 1956. The RBI is required by the Minimum Reserve System to keep a minimum reserve of an amount of about Rs 200 crores in foreign currency, gold bullion & gold coins.
Detailed explanation-2: -In terms of Section 22 of the Act, Reserve Bank has the sole right to issue banknotes in India. Section 25 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.
Detailed explanation-3: -Reserve bank of India maintains certain reserves. This is to provide support to the total volume of currency issued by the Reserve Bank of India. According to proportional reserve system, out of the reserves, certain percentage or proportion has to be held in the form of precious metals like gold.
Detailed explanation-4: -System of Note Issue changed from Proportional Reserve System requiring the Reserve Bank to maintain 40% gold and forex reserves against note issue to a minimum reserve system. This was to enable the expanding currency requirements of the economy to be met.