QUESTION

Medium

Economy

Prelims 2025

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.

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Explanation

The Reserve Bank of India earns income through financial operations such as managing government securities, foreign exchange, and issuing currency. It does not operate like a commercial bank or a pension fund manager.

✅ Statement I: Correct Buying and selling Government bonds through Open Market Operations earns the RBI interest and trading profits.

✅ Statement II: Correct Forex operations and investment of foreign exchange reserves generate income for the RBI.

❌ Statement III: Incorrect RBI does not manage pension funds; that is done by entities like PFRDA.

❌ Statement IV: Incorrect RBI does not lend directly to private companies; it lends to banks, which in turn lend to companies.

✅ Statement V: Correct Printing and distributing currency notes yields income through seigniorage—the profit from face value minus production cost.

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