📘 Q.2 IAS Prelims 2025 — Economy (RBI | Sources of Income)
🧷 Authentic Classroom Explanation by IAS Monk
📌 The Question:
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
🧠 Curiosity Raiser
Why does a central bank like RBI earn income at all, when its job is “policy” and not “profit”?
Because monetary stability itself requires financial strength, and RBI must fund its operations without budgetary dependence.
📘 Enrichment Notes (Prelims-Focused)
🔹 RBI’s Major Sources of Income
- Open Market Operations (OMOs)
- RBI buys and sells Government bonds
- Earns through interest income and capital gains
✅ Statement I is correct
- Foreign Exchange Operations
- RBI trades foreign currencies to manage volatility
- Profits arise from exchange rate movements
✅ Statement II is correct
- Seigniorage (Currency Issuance)
- Currency notes cost less to print than their face value
- The difference is RBI’s income
✅ Statement V is correct
❌ What RBI does NOT earn from
- Pension fund management
▸ Done by bodies like EPFO, PFRDA
❌ Statement III is incorrect - Direct lending to private companies
▸ RBI lends to banks & financial institutions, not private firms
❌ Statement IV is incorrect
🧘♂️ IAS Monk Whisper
Power over money is meaningless without discipline. RBI earns, not to enrich itself, but to remain sovereign in its judgment.