Economy · Quantitative Instruments (Repo, CRR, SLR, OMO, LAF)
The concept being tested: RBI Income Sources — OMO and Forex Operations.
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.
RBI's income comes almost entirely from interest and trading gains on the assets it holds while conducting monetary and reserve-management operations. Buying and selling government bonds through Open Market Operations earns RBI interest on its G-sec holdings and profit on the price spread; buying and selling foreign currency as part of managing the forex reserves and gold generates returns that form the largest share of the surplus RBI transfers to the government each year. Pension fund management is handled by the PFRDA and the NPS Trust, not RBI. RBI's liquidity operations counterparties are banks and primary dealers, not private companies, so it does not lend to them directly. Printing and distributing currency notes is a core central-banking function that costs RBI money, since it pays its own presses to produce notes; it is an expenditure, not a revenue stream. Only the bond and forex operations, therefore, qualify as income sources.
What UPSC was testing
The question tests whether aspirants can distinguish RBI's actual functions, like currency issue and liquidity management, from what genuinely earns it income; printing currency notes and lending to private companies are classic distractors built from adjacent RBI functions rather than real revenue sources.
How often this comes up
This concept has appeared 18 times in UPSC Prelims General Studies Paper I between 2015 and 2025 — in 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 and 2025.
The option-by-option autopsy for this question — why each of the other three is wrong, and which neighbouring concept each one was built from — is in the app.