2025 GS Paper I, all questions

UPSC Prelims 2025 · GS Paper I

Question 2: Economy and Social Development

Which of the following are the sources of income for the Reserve Bank of India?

  1. IBuying and selling Government bonds
  2. IIBuying and selling foreign currency
  3. IIIPension fund management
  4. IVLending to private companies
  5. VPrinting 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 V

AnswerThe answer is (a).

The RBI earns mainly from two operations: interest and gains on the government securities it holds and trades, and interest and gains from its foreign currency assets and foreign exchange dealing. It also earns from lending to banks and from fees for managing government debt. It does not lend to private companies. Printing notes is a cost to the RBI, not income, and pension fund regulation belongs to PFRDA. Remember: RBI income is investment income, not business lending.

  • I. Interest and trading gains on government securities are a major income source.
  • II. Foreign currency assets and forex operations earn interest and trading gains.
  • III. Pension funds are regulated by PFRDA, not run by the RBI for income.
  • IV. The RBI lends to banks and the government, not to private companies.
  • V. Printing and distributing notes costs money; it is not itself a source of income.

How you could have got this

  1. If you were sure statement I is correct, (b) goes: it leaves I out.

    What you needed to know: Interest and trading gains on government securities are a major income source.

  2. Then, if you were sure statement V is not correct, (c) and (d) go: each of them includes V.

    What you needed to know: Printing and distributing notes costs money; it is not itself a source of income.

Only (a) is left. You didn’t need statements 2, 3 or 4.

This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Right: dealing in government bonds and in foreign currency are the two main earners.
  • (b) Wrong: pension fund management is not an RBI activity and it does not lend to private companies.
  • (c) Wrong: it adds three non-sources (pension funds, private lending, note printing) and leaves out foreign currency.
  • (d) Wrong: note printing is an expense for the RBI, not a source of income.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2025, General Studies Paper I, Series A. The paper on upsc.gov.in.