Explain the functions of the central bank as a banker to the Government.
The Central bank serves as a banker to the Central Government
and the State Governments. It is its obligatory function. It performs the
following functions:-
1) As a bank for the government:- As a banker,
the central bank performs banking functions for the government as commercial
banks perform for the public by accepting the government deposits and granting
loans to the government. Central bank also performs the function of making receipts
and collection of payments to the Central and State Governments & making
payments on behalf of the Central and State Governments.
2) As an agent of the government:- As an agent, the central bank manages the public debt,
undertakes the payment of interest on this debt, and provides all other
services related to the debt.
3) An advisor to the government:- As an
advisor, the central bank gives advice to the government regarding economic
policy matters, money market, capital market, and government loans. Apart from
this, the central bank formulates and implements fiscal and monetary policies
to regulate the supply of money in the market and control inflation.
The Central bank serves as a banker to the Central Government and the State Governments. It is its obligatory function. It performs the following functions:-
1) As a bank for the government:- As a banker, the central bank performs banking functions for the government as commercial banks perform for the public by accepting the government deposits and granting loans to the government. Central bank also performs the function of making receipts and collection of payments to the Central and State Governments & making payments on behalf of the Central and State Governments.
2) As an agent of the government:- As an agent, the central bank manages the public debt, undertakes the payment of interest on this debt, and provides all other services related to the debt.
3) An advisor to the government:- As an advisor, the central bank gives advice to the government regarding economic policy matters, money market, capital market, and government loans. Apart from this, the central bank formulates and implements fiscal and monetary policies to regulate the supply of money in the market and control inflation.
