UPSC Prelims 2025 · Question 32 of 100
UPSC Prelims 2025 question on RBI Income Sources
- ExamUPSC CSE
- Year2025
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyMedium
- TypeStatement
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.
Show answer
Answer: D. I, II and V
I – CORRECT: The RBI earns money through open market operations — buying and selling central bank purchases or sells bonds (including government bonds) in the open market to regulate money supply. This is a major source of income.
II – CORRECT: Dealings in the foreign exchange market (buying and selling foreign currency) are also a source of income for the RBI. The RBI may buy dollars cheaply and sell them dear in the future to pocket profits.
III – INCORRECT: RBI does not manage pension funds. Pension fund management is generally done by entities like EPFO or PFRDA.
IV – INCORRECT: RBI does not lend directly to private companies. It lends to commercial banks and other financial institutions as part of its monetary policy operations.
V – CORRECT: RBI also earns income by printing currency — called seigniorage — since notes cost less to produce than their face value.
Sources I, II, and V are correct → Option (d).