Discussion
The RBI is bound to maintain a reserve against the issue whatever may be the amount. This system is called as
Answer: A
Correct answer: Minimum Reserve System
Under the minimum reserve system, adopted in India in 1957, the RBI must hold a fixed minimum of gold and foreign securities - ₹200 crore, of which ₹115 crore in gold - whatever the quantity of notes issued. It replaced the proportional reserve system, which required reserves to be a fixed percentage of the notes in circulation and so limited how much could be issued.
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