UPSC Prelims 2020 GS Paper I · Q17 of 99 Economy easy

"Gold Tranche" (Reserve Tranche) refers to

  1. (a) a loan system of the World Bank
  2. (b) one of the operations of a Central Bank
  3. (c) a credit system granted by WTO to its members
  4. (d) a credit system granted by IMF to its members ✓ UPSC's answer

Why the answer is (d)

• Each IMF member pays a quota, 25% of which was historically in gold (now reserve assets/SDRs) and 75% in its own currency.

• The 'gold tranche' or reserve tranche is that 25% portion; a member may draw on it automatically, without conditions or interest, as a first line of credit from the IMF — option (d).

• Borrowing beyond it (credit tranches) attracts conditionality.

• It is not a World Bank loan (a), a central-bank operation (b) or a WTO facility (c) — the WTO does not lend.

• Hence option (d).

Why the other options are wrong

(a) a loan system of the World Bank
The World Bank does not operate tranches of this kind.
(b) one of the operations of a Central Bank
It is an IMF quota concept, not a central-bank operation.
(c) a credit system granted by WTO to its members
The WTO is a trade body and grants no credit.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2020, held on 4 October 2020. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

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