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Sunday, 18 November 2018

The present Indian monetary system is based on

  By GK Planet Team       Sunday, 18 November 2018
Q. The present Indian monetary system is based on
  1. Gold reserve system
  2. Proportional Reserve System
  3. Convertible Currency system
  4. Minimum Reserve system
Answer: Minimum Reserve System

Indian Monetary System

A monetary system is the set of institutions by which a government provides money in a country's economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks.

The monetary system prevailing in India at present is managed and controlled by the Reserve Bank India. The present monetary system is based on inconvertible paper currency, supplemented by coins. On the external front Indian currency 'rupee' is again convertible to various other currencies of the world.

In order to issue currency notes of different denominations, the RBI followed the system as the backing of the value of notes issued, which is known as proportional reserve system. The proportional reserve system of note issue was followed in India until 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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