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
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Answer & Explanation:
✅Correct Answer: (a) I and II only
📌 Understanding RBI’s Sources of Income:
The Reserve Bank of India (RBI), as the central bank of the country, earns income through various monetary operations. It is not a commercial bank, so its income sources are different from typical banks.
Let’s analyze each statement:
I. Buying and selling Government bonds
✅ Correct
RBI earns income through Open Market Operations (OMOs), where it buys and sells government securities (bonds). It earns interest on the securities it holds. This is a major source of income for the RBI.
II. Buying and selling foreign currency
✅ Correct
RBI manages India’s foreign exchange reserves and earns income through trading and holding foreign assets like U.S. Treasury bonds. The appreciation/depreciation of currency and interest earned on foreign securities also contributes to its income.
III. Pension fund management
❌ Incorrect
RBI does not manage pension funds for general income. While it may handle pension schemes for its employees, this is not a source of income. Pension fund management is typically done by bodies like PFRDA (Pension Fund Regulatory and Development Authority).
IV. Lending to private companies
❌ Incorrect
RBI does not lend directly to private companies. It provides liquidity to banks and financial institutions but not to private companies. Therefore, this is not a valid income source.
V. Printing and distributing currency notes
❌ Incorrect
RBI prints and distributes currency notes, but this is not a source of income. In fact, it’s an expenditure for the RBI. The cost of printing currency is borne by the central bank.
✅ Correct Answer: (a) I and II only
Summary:
The RBI earns income primarily through interest on government securities and trading in foreign exchange. It does not earn by printing currency, lending to private companies, or managing pensions.