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.
- AI and II only
- BII, III and IV
- CI, III, IV and V
- DI, II and VCorrect
Explanation
The Reserve Bank of India derives income from the following sources:
I. Buying and selling Government bonds: Yes, RBI earns income through its open market operations, earning interest on government securities it holds and trading gains/losses.
II. Buying and selling foreign currency: Yes, RBI earns income from foreign exchange operations, including interest on foreign currency reserves and gains from currency trading.
III. Pension fund management: No, RBI does not manage pension funds. Pension fund management is handled by specialized pension fund managers and PFRDA.
IV. Lending to private companies: No, RBI does not directly lend to private companies. It lends to banks and financial institutions, which then lend to private companies.
V. Printing and distributing currency notes: Yes, RBI has the sole authority to issue currency and earns seigniorage (the difference between the cost of printing money and its face value).
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