Question

Explain the function of Central Bank as a "Banker to the Government".

Answer 1

Banker to the government -

The Central Bank carries out all banking business of government both state and central governments. Government keeps their cash balances in the current account with the central bank. Similarly, central bank accepts receipts and makes payment on behalf of these governments. It gives loans and advances. It also manages public debt of the country. Central bank accepts receipts and makes payment on behalf of the government.