Question

Under India’s practice, RBI initially followed which system till 1956?

• A. Minimum Reserve System
• B. Fixed Fiduciary System
• C. Proportional Reserve System
• D. Maximum Fiduciary System

Answer 1

Answer:

C. Proportional Reserve System

Under the Minimum Reserve System, the RBI was required to maintain a minimum reserve of ₹200 lakh, consisting of gold and approved government securities, to back currency notes. This system ensured public confidence in the currency while allowing RBI some flexibility in note issuance.