Question

The Central Bank is the apex monetary institution of the country. Explain its role of a Banker of the Government. 

Explain the following function of the central bank of a country.

Acting as a Banker to the Government.

Discuss the role of the Central Bank as the banker to the government. 

With reference to the central bank of a country.

List two ways in which a central bank acts as 'Banker to the Government.

Explain the function of the Central Bank as a banker to the government.

Answer 1

The central bank acts as a banker to the government both central as well as state governments in the following ways:

1. As the government's banker, the central bank accepts receipts and makes payments. It also provides short-term loans to the government in times of difficulty. 
2. As a government agent, the central bank sells and purchases government securities and also manages public debt (national debt) and foreign debt.
3. The central bank also acts as an advisor to the government, especially in monetary, banking, and financial matters.