Minimum reserve system of Rbi

Minimum Reserve System

It is the minimum amount of reserves or assets to be maintained such as gold, forex reserve etc by the central banks to print the money and distribute it to the economy. The money supply in the economy or the central bank should print the money, that exceeds the minimum reserve system.

Rbi Minimum Reserve System

The Minimum Reserve System requires the RBI to keep a minimum reserve of Rs 200 crores comprising foreign currencies, gold coins and gold bullion (a minimum of Rs 115 crore in the form of gold). There is no limit for the RBI to issue currencies by keeping this minimum reserve. This was adopted in 1956.

Earlier there was Proportional Reserve System. Then System of Note issue changed. Thereby it required the Reserve bank to maintain a 40% gold and forex reserve against note issues. This is to meet the minimum reserve system. This is done to meet the expanding currency requirement of the economy.

FAQ

When was the minimum reserve system started in India?

It was 6 October 1956, that minimum reserve system started in India.

* * All the Notes in this blog, are referred from Tamil Nadu State Board Books and Samacheer Kalvi Books. Kindly check with the original Tamil Nadu state board books and Ncert Books.
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