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Questions
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.
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Solution
The central bank acts as a banker to the government both central as well as state governments in the following ways:
- 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.
- As a government agent, the central bank sells and purchases government securities and also manages public debt (national debt) and foreign debt.
- The central bank also acts as an advisor to the government, especially in monetary, banking, and financial matters.
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