Which of the following are the sources of income for the Reserve Bank of India?Buying and selling Go

Question

Which of the following are the sources of income for the Reserve Bank of India?Buying and selling Government bondsBuying and selling foreign currencyPension fund managementLending to private companiesPrinting and distributing currency notesSelect the correct answer using the code given below:

Accepted Answer

The RBI earns money in a variety of ways. Open market operations, wherein a central bank purchases or sells bonds (including government bonds) in the open market in order to regulate money supply in the economy, are a major source of income for the RBI. Apart from the interest received from these bonds, the RBI may also profit from favourable changes in bond prices. Dealings in the foreign exchange market that the RBI engages in may also contribute to the bank’s profits. The RBI, for instance, may buy dollars cheaply and sell them dear in the future to pocket profits. RBI also earns income by printing currency which is called seigniorage - since notes cost less to produce than their face value. RBI does not manage pension funds as a source of income. It is generally done by entities like EPFO or PFRDA in India. RBI does not lend directly to private companies. It lends to commercial banks and other financial institutions, as part of its monetary policy operations. Hence option (D) is the correct answer.