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Study Notes: Banking and Finance

Dear BA’ins, 
Study Notes: Banking and Finance |_2.1

Today in the study Notes we are Discuss about IMF


The International Monetary Fund (IMF) is an organization of 189 countries, working
to foster global monetary cooperation, secure financial stability, facilitate
international trade
, promote high employment and sustainable economic growth,
and reduce poverty around the world.

Created in 1945,
the IMF is governed by and accountable to the 189 countries that make up its
near-global membership.
April 12, 2016 — IMF Survey : Nauru Joins the IMF as 189th Member 

Each country or region is represented by a member on the
Fund’s Executive Board and numerous staff members. The ratio of board members
from each country is based on the country’s global financial position, so that
the most powerful countries in the
global economy have the heaviest representation
. The United States has the
highest voting power, followed by Asian countries such as Japan and China and
Western European countries such as Britain, Germany, France, and Italy

Headquarters    -Washington, D.C., United States

Managing Director
Christine Lagarde

Main organ– Board
of governors

Board of Governors
The Board of Governors consists of one governor and one
alternate governor for each member country. Each member country appoints its
two governors. The Board normally meets once a year and is responsible for
electing or appointing executive directors to the Executive Board. While the
Board of Governors is officially responsible for approving quota increases,
Special Drawing Right allocations, the admittance of new members, compulsory
withdrawal of members, and amendments to the Articles of Agreement and By-Laws,
in practice it has delegated most of its powers to the IMF’s Executive Board
Why the IMF was
created and how it works
The IMF, also known as the Fund, was conceived at a UN
conference in Bretton Woods, New Hampshire, United States, in July 1944. The 44
countries at that conference sought to build a framework for economic
cooperation to avoid a repetition of the competitive devaluations that had
contributed to the Great Depression of the 1930s.
The IMF’s
The IMF’s primary purpose is to ensure the stability of the international monetary system—the
system of exchange rates and international payments that enables countries (and
their citizens) to transact with each other. The Fund’s mandate was updated in
2012 to include all macroeconomic and financial sector issues that bear on
global stability.
The IMF vs. the World
The IMF works hand-in-hand with the World Bank, and although
they are two separate entities, their interests are aligned, and they were
created together. While the IMF provides
only shorter-term loans
that are funded by member quotas, the World Bank focuses on long-term
economic solutions and the reduction of poverty and is funded by both member
contributions and bonds. The IMF is more
focused on economic policy solutions
, while the World Bank offers assistance in such programs as building necessary
public facilities
and preventing disease.

Special Drawing Right
The SDR (Also known
as the Paper Gold
) was redefined as a basket of currencies. Currently, the
SDR basket consists of the U.S. dollar, euro, Japanese yen, and pound sterling.
Effective October 1, 2016, the basket will be expanded to include the Chinese renminbi.
The respective weights of the U.S. dollar, euro, Chinese
renminbi, Japanese yen, and pound sterling are 41.73 percent, 30.93 percent,
10.92 percent, 8.33 percent, and 8.09 percent.1 These weights will be used to
determine the amounts of each of the five currencies to be included in the new
SDR valuation basket that will take effect on October 1, 2016

How a Country Can
Join the IMF
Countries must apply to be a part of the IMF, although any
country can apply. Over time, the stipulations of being a member have changed,
with membership requirements being more relaxed when the Fund was in its early
stages. Countries are required to make membership payments, or quotas, which
are assigned to individual countries based on their economic size and stipulate
how much they contribute. These quotas are larger for more powerful economies,
and they form a pool from which countries in need can take loans. Member
countries are also required to adhere to the Code of Conduct, and stricter
regulations may be imposed on those countries who apply in hopes of financial
 All the Very Best BA’ins for IBPS PO 2016 Prelims 

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