Q. Consider the following statements regarding “Minimum Reserve System (MRS)”:
1.The RBI is required to maintain a reserve equivalent of Rs. 200 crores in gold and foreign currency with itself, of which Rs. 115 crores should be in gold.
2.Against this reserve, the RBI is empowered to issue currency to any extent.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

Explanation: The RBI is required to maintain a reserve equivalent of Rs. 200 crores in gold and foreign currency with itself, of which Rs. 115 crores should be in gold.

  • Against this reserve, the RBI is empowered to issue currency to any extent.
  • This is being followed since 1957 and is known as the Minimum Reserve System (MRS).

Source: Ramesh Singh

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