Question

What is the need of minimum reserve system?

Answer 1

Originally, the assets of the Issue department were to consist of not less than 2/5th of the Gold or sterling securities, provided Gold was NOT less than Rs. 40 Crores in value. Remaining 3/5th of the assets might be rupee coins. This was called Proportional Reserve System. The system changed in 1956. Since then, RBI is required to maintain a Gold and Foreign Exchange Reserves of Rs. 200 Crore of which at least Rs. 115 Crore should be in Gold. This is called Minimum Reserve System. This system continues till date.

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