GS PrelimsEconomyExternal Sector2020

"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 credit system granted by WTO to its members

D

a credit system granted by IMF to its members

Correct Answer: Option D

Explanation

1. The 'Gold Tranche' or 'Reserve Tranche' is related to a member country's quota with the International Monetary Fund (IMF). 2. When a country joins the IMF, it contributes a certain amount of money, called a quota subscription, based on its economic size and characteristics. A portion of this quota (historically paid in gold, hence the name 'Gold Tranche', now in major convertible currencies) constitutes the 'Reserve Tranche'. 3. This Reserve Tranche represents the amount of foreign currency a member country can withdraw from the IMF automatically, without conditions or service charges, essentially as part of its own reserves held by the IMF. 4. Therefore, it is a form of credit system (access to foreign exchange) granted by the IMF to its members. 5. Option (A) is incorrect; it's an IMF mechanism, not World Bank. 6. Option (B) is incorrect; it's an international financial arrangement, not a domestic Central Bank operation. 7. Option (C) is incorrect; the WTO deals with trade regulations, not this type of credit system.

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