Question

Which of the following item is the largest source of profit for RBI?
1. Printing and minting of currency notes
2. Interest earned on bond holdings 
3. Demonetization of currency notes
4. Interest earned on cash reserve ratios parked by the commercial banks in RBI

Answer 1

Correct Answer - Option 2 : Interest earned on bond holdings 

The correct answer is 

• The RBI earns money in a variety of ways.
• Open market operations, wherein the central bank purchases or sells 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 dearly in the future to pocket profits.

 

• Reserve Bank of India
  • The concept of the Reserve Bank of India was based on the strategies formulated by Dr Ambedkar in his book named “The Problem of the Rupee - Its origin and its solution”.
  • This central banking institution was established based on the suggestions of the “Royal Commission on Indian Currency & Finance” in 1926.
  • This commission was also known as Hilton Young Commission.
  • In 1949, the Reserve Bank of India was nationalized and became a member bank of the Asian Clearing Union.
  • RBI regulates the credit and currency system in India.
  • The chief objectives of the RBI are to sustain the confidence of the public in the system, protect the interests of the depositors, and offer cost-effective banking services like cooperative banking and commercial banking to the people.
  • Governor of RBI - Shri Shaktikanta Das.