Q. Which of the following are the sources of income for the Reserve Bank of India?
I. Buying and selling Government bonds
II. Buying and selling foreign currency
III. Pension fund management
IV. Lending to private companies
V. Printing and distributing currency notes
Select the correct answer using the code given below.
(a) I and II only
(b) II, III and IV
(c) I, III, IV and V
(d) I, II and V
Correct Answer: (d) I, II and V
UPSC Prelims 2025 GS Paper's Solution
Explanation :Â
The Reserve Bank of India (RBI) generates income primarily through the following activities:
I. Buying and selling Government bonds: The RBI conducts open market operations (OMOs), which involve buying and selling government securities. Through these transactions, RBI earns income in the form of interest and capital gains.
II. Buying and selling foreign currency: RBI actively manages India’s foreign exchange reserves. It earns income through trading foreign currencies, interest earned on foreign securities, and gains from currency valuation changes.
V. Printing and distributing currency notes: The RBI has the sole authority to issue currency notes in India. The difference between the cost of printing currency notes and their face value (known as seigniorage) constitutes a significant source of income for the RBI.
Activities not considered as RBI’s sources of income:
- III. Pension fund management:Â RBI does not manage pension funds as a source of income.
- IV. Lending to private companies:Â RBI generally does not lend directly to private companies for profit-making purposes. Its lending activities are primarily directed towards banks and financial institutions for monetary policy purposes rather than commercial profit.
Thus, the correct answer is option (d): I, II and V.
