Which of the following system is followed by the Reserve Bank of India for issuing currency?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Minimum Reserve System.
The Reserve Bank of India (RBI) follows the Minimum Reserve System for issuing currency in India.
Under this system, the RBI is required to maintain a minimum reserve of Rs. 200 crore, of which:
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Rs. 115 crore must be in the form of gold, and
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The remaining Rs. 85 crore in foreign securities.
This system allows the RBI to issue currency beyond the amount of backing with gold or foreign exchange, as long as the minimum reserve is maintained.
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