The correct answer is (b) Minimum Reserve System.
The Reserve Bank of India (RBI) follows a minimum reserve system of note issue. Under this system, the RBI is required to maintain a certain minimum amount of gold or foreign exchange against the total value of notes in circulation. The minimum reserve requirement is currently set at 20%.
The minimum reserve system is designed to ensure the convertibility of the Indian rupee into gold or foreign exchange. It also helps to control the money supply in the economy.
The proportional reserve system is a system of note issue in which the central bank is required to hold a certain proportion of the value of notes in circulation as reserves. This system was used in India until 1935.
The fixed fiduciary system is a system of note issue in which the central bank is allowed to issue notes without any backing. This system was used in India from 1861 to 1935.
The minimum reserve system is a more prudent system of note issue than the proportional reserve system or the fixed fiduciary system. It helps to ensure the convertibility of the currency and to control the money supply.