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Consider the following statements and identify the right ones.
i. RBI has the sole right to issue currency notes
ii. Minimum reserve system has been replaced by proportional reserve system
i. RBI has the sole right to issue currency notes
ii. Minimum reserve system has been replaced by proportional reserve system
- a)i only
- b)ii only
- c)both
- d)none
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Consider the following statements and identify the right ones.i. RBI h...
Proportional reserve system has been replaced by minimum reserve system.
Most Upvoted Answer
Consider the following statements and identify the right ones.i. RBI h...
Explanation:
i. RBI has the sole right to issue currency notes:
- The Reserve Bank of India (RBI) is the central banking institution of India and has been given the authority to issue currency notes.
- This power is derived from the Reserve Bank of India Act, 1934.
- As per Section 22 of the Act, RBI has the sole right to issue banknotes in India.
- No other entity, including the Government of India, is authorized to issue currency notes.
ii. Minimum reserve system has been replaced by proportional reserve system:
- The minimum reserve system and the proportional reserve system refer to two different methods of maintaining reserves by banks.
- In the minimum reserve system, banks are required to maintain a fixed percentage of their deposits as reserves.
- This fixed percentage is determined by the central bank and is usually a small fraction of the total deposits.
- In the proportional reserve system, banks are required to maintain reserves in proportion to their deposits.
- The proportion is determined by the central bank and can vary based on the size and type of deposits.
- The proportional reserve system is more flexible and allows banks to adjust their reserves based on their deposit levels.
- In India, the minimum reserve system was replaced by the proportional reserve system in 1976.
- This was done to give banks more flexibility in managing their reserves and to align with international banking practices.
Conclusion:
- From the given statements, statement i is correct as RBI indeed has the sole right to issue currency notes.
- Statement ii is incorrect as the minimum reserve system has been replaced by the proportional reserve system in India.
i. RBI has the sole right to issue currency notes:
- The Reserve Bank of India (RBI) is the central banking institution of India and has been given the authority to issue currency notes.
- This power is derived from the Reserve Bank of India Act, 1934.
- As per Section 22 of the Act, RBI has the sole right to issue banknotes in India.
- No other entity, including the Government of India, is authorized to issue currency notes.
ii. Minimum reserve system has been replaced by proportional reserve system:
- The minimum reserve system and the proportional reserve system refer to two different methods of maintaining reserves by banks.
- In the minimum reserve system, banks are required to maintain a fixed percentage of their deposits as reserves.
- This fixed percentage is determined by the central bank and is usually a small fraction of the total deposits.
- In the proportional reserve system, banks are required to maintain reserves in proportion to their deposits.
- The proportion is determined by the central bank and can vary based on the size and type of deposits.
- The proportional reserve system is more flexible and allows banks to adjust their reserves based on their deposit levels.
- In India, the minimum reserve system was replaced by the proportional reserve system in 1976.
- This was done to give banks more flexibility in managing their reserves and to align with international banking practices.
Conclusion:
- From the given statements, statement i is correct as RBI indeed has the sole right to issue currency notes.
- Statement ii is incorrect as the minimum reserve system has been replaced by the proportional reserve system in India.
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Consider the following statements and identify the right ones.i. RBI has the sole right to issue currency notesii. Minimum reserve system has been replaced by proportional reserve systema)i onlyb)ii onlyc)bothd)noneCorrect answer is option 'A'. Can you explain this answer?
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