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 ✓ UPSC's answer
- (b) II, III and IV
- (c) I, III, IV and V
- (d) I, II and V
Why the answer is (a)
• The RBI's income comes chiefly from interest on the government securities it holds (bought and sold through open market operations) and from returns and revaluation gains on its foreign-currency assets, which it buys and sells to manage the rupee — items I and II are sources of income.
• Item III is wrong: the RBI does not manage pension funds; that is the domain of PFRDA-regulated fund managers.
• Item IV is wrong: the RBI lends only to banks and the government as lender of last resort, never to private companies.
• Item V is wrong: printing currency is a cost to the RBI (paid to its presses), not a revenue; the RBI earns seigniorage indirectly through the assets backing the notes, not from 'printing and distributing' them.
• Hence I and II only, option (a). The surplus from these sources is what the RBI transfers to the government each year.
Why the other options are wrong
- (b) II, III and IV
- The RBI neither manages pension funds nor lends to private companies.
- (c) I, III, IV and V
- Pension management, private lending and note printing are not RBI income sources.
- (d) I, II and V
- Printing and distributing notes is an expense, not income.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2025, held on 25 May 2025. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.