Question

 Do you agree with the following statements? Give reasons. 

 Central bank works as Government’s bank. 

Answer 1

3. We agree with the statement that the central bank works as the governments bank. ​Central bank acts as a banker and financial advisor to the government. As a banker to the government, it performs the following functions.
i. Manages accounts- The central bank manages the account of the government. It acts as a custodian of government funds and takes care of all the cash balances of the government.
ii. Receives and make payments- It accepts receipts from the government and makes payment on behalf of it such as paying salaries to the goverment servants, giving interest on public debt, etc.
iii. Grant loans- The central bank grants short-term loans and credit to the government. These are often done by discounting the treasury bills of the government.
iv. Manages debt- It performs the task of managing the public debt. It also provides the government with the foreign exchange whenever there is a requirement to meet the external debt obligations.
v. Advises government- The central bank advises the government on all the banking and financial related matters.