“Gold tranche” (Reserve Tranche) refers to

1. A loan system of the World Bank
2. One of the operations of a central bank
3. A credit system of WTO granted to its members
4. A credit system granted by IMF to its members

Explanation

Option (d) is correct

• A reserve tranche is a portion of the required quota of currency each member country must provide to the International Monetary Fund (IMF) that can be utilised for its own purposes, without a service fee or economic reform conditions. Initially, member nations’ reserve tranches are 25% of their quotas, but this position can change depending on any lending the IMF makes using its holdings of the member’s currency. The reserve tranches that countries hold with the IMF are considered their facilities of first resort, meaning they will tap into them before seeking a formal credit tranche that charges interest.
• For any member country, out of the total quota, 25% should be paid in the form of foreign currency or gold. Hence, this is called the reserve tranche or gold tranche. The remaining 75% can be in domestic currencies, and it is called the credit tranche.

Answer: (d) A credit system granted by IMF to its members; Difficulty Level: Medium