Question : Which of the following is followed by the Reserve Bank of India for issuing currency?
Option 1: Minimum reserve system
Option 2: Proportionate system
Option 3: Fixed fiduciary issue system
Option 4: Simple deposit system
Correct Answer: Minimum reserve system
Solution : The correct answer is
The correct answer is (a) Minimum reserve system.
The Reserve Bank of India (RBI) follows the minimum reserve system for issuing currency. Under this system, the RBI is required to hold a minimum amount of gold and foreign securities as reserves in relation to the total value of currency issued. This system ensures that there is a backing of assets for the currency in circulation, maintaining its value and credibility.
In the minimum reserve system, the reserves held by the central bank act as a guarantee for the value of the currency issued. It provides stability and confidence in the currency and helps in regulating the money supply in the economy.
Therefore, the correct option is (a) Minimum reserve system.




