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Q87 (IAS/2020) Economy › External Sector & Trade › International Monetary Fund Official Key

"Gold Tranche" (Reserve Tranche) refers to

Result
Your answer: —  ·  Correct: D
Explanation

The correct answer is Option 4. The Gold Tranche, now commonly referred to as the Reserve Tranche, is a crucial component of the International Monetary Fund (IMF) quota system.

The explanation for why Option 4 is correct involves the following points:

  • Definition: It represents a portion of a member country's quota that can be accessed without any conditionality or service fees.
  • Composition: Originally, members paid 25% of their quota in gold (hence "Gold Tranche") and 75% in their domestic currency. Today, this 25% is typically held in Special Drawing Rights (SDRs) or foreign exchange.
  • Liquidity: This tranche is considered a part of a country's own international reserves and can be withdrawn at any time to meet balance of payments needs.

Options 1, 2, and 3 are incorrect because the World Bank focuses on developmental loans, Central Bank operations concern domestic monetary policy, and the WTO deals with trade regulations, not international liquidity systems.

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. "Gold Tranche" (Reserve Tranche) refers to [A] a loan system of the World Bank [B] one of the operations of a Central Bank [C] a credi…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
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This is a textbook 'Term-Association' question. Standard Economy books (Vivek Singh/Singhania) explicitly define Reserve Tranche under the IMF chapter. If you read the static portion on Bretton Woods institutions, this is free marks.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
What does the term "Gold Tranche" (Reserve Tranche) refer to in the context of the International Monetary Fund (IMF)?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > Quota is used to determine the following: > p. 398
Presence: 5/5
“• 1. Subscription (maximum amount of financial resources that a member is obligated to provide to the IMF),• 2. Voting power/rights in IMF decision making,• 3. Member country's share of SDR allocations (acts as debt on member country)• 4. Borrowing capacity (financial assistance a member may obtain from the IMF) Reserve Tranche Position (RTP): That proportion of the Quota which the IMF member country can designate for its own use. The reserve tranche portion of the quota can be accessed by the member nation anytime at its own discretion (and is not under an immediate obligation to repay those funds to the IMF), whereas the rest of the member's quota is typically inaccessible.”
Why this source?
  • Defines Reserve Tranche Position (RTP) as the portion of a member's quota that the country can designate for its own use.
  • Specifies that this reserve tranche portion can be accessed anytime and is not under an immediate obligation to be repaid to the IMF.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > NO IMF Quota for Member Countries > p. 515
Presence: 5/5
“• Member countries are assigned a quota which determines their maximum contribution to the IMF's finance resources. Quotas are denominated in SDRs.• The quota of a country is determined by its relative position in the global economy. • The member country can pay up to 25 per cent of the quota in foreign currencies (i.e. US dollar, Euro, Yen, etc.). This is called Reserve Tranche.• Quotas are reviewed at least after every 5 years. Here, the GDP is measured through a blend of: • Market exchange rates, weighing around 60 per cent • PPP exchange rates, weighing 40 per cent”
Why this source?
  • States that up to 25% of a member's quota can be paid in foreign currencies and labels this portion as the Reserve Tranche.
  • Links the concept of Reserve Tranche directly to quota payment composition, clarifying its financial character.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > FOREIGN EXCHANGE RESERVES > p. 483
Presence: 4/5
“Balance of Payments 16.15 • India's forex reserves stand at US$ 583.94 billion as on 5 February 2021 (based on RBI \sigmareport). • India's foreign exchange reserves include: ö • FCAs (Foreign Currency Assets) 1. 2. Monetary gold 3. SDRs (Special Drawing Rights) (SDRs are held in the custody of the government instead of RBI) 4. RTP (Reserve Tranche Position) in the International Monetary Fund (IMF). • At present, FCAs have the maximum share (>90%) in the forex reserves of RBI, followed by gold. Reserve Tranche - It is a portion of the required quota of currency that each member country must provide to the IMF which can be utilised for its own purposes.”
Why this source?
  • Lists Reserve Tranche Position (RTP) as a component of a country's foreign exchange reserves.
  • Defines Reserve Tranche as a portion of the required quota that a member country can utilize for its own purposes.
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