Economics • Banking & FinanceHard
What does the term 'Special Drawing Rights (SDR)' represent in international finance and central banking reserves?
A. An international reserve asset created by the International Monetary Fund, whose value is based on a basket of major world currencies✓ Correct Answer
B. A special credit line extended by the World Bank to developing nations for sovereign debt restructuring
C. A bilateral currency swap agreement between central banks to stabilize foreign exchange market volatility
D. An emergency loan facility provided by the Bank for International Settlements during global banking panics
💡 Solution & Explanation
Special Drawing Rights are an international reserve asset created by the International Monetary Fund in 1969 to supplement member countries' official reserves, with its value determined by a weighted basket of major global currencies. Distractors misattribute this to World Bank debt restructuring, bilateral currency swaps, or Bank for International Settlements emergency loans. Member countries hold SDRs in proportion to their IMF quotas and can exchange them for usable currencies. The currency basket is reviewed every five years by the International Monetary Fund executive board.
More Economics Banking & Finance questions
- Which specialized financial institution was established in India to provide refinance facilities and…
- Which institution in India acts as the apex refinancing agency for institutional credit directed toward the…
- What does the term 'Repo Rate' signify in the framework of monetary policy?
- Which of the following refers to 'Non-Performing Assets (NPAs)' in the Indian banking system?
- What is the primary function of the 'Deposit Insurance and Credit Guarantee Corporation (DICGC)', a…