Question

______ acts as a banker, advisor and agent to the Central and State Governments.

Options

• Commercial bank

• Central bank

• Private bank

• None of the above

Answer 1

The central bank acts as a banker, advisor, and agent to the Central and State Governments.

Explanation:

The Central Bank serves the federal and state governments as a banker, counselor, and agency. It is in charge of the government's banking operations. The government retains its cash balances in the central bank's current account. Similarly, the central bank collects receipts from governments and makes payments on their behalf. In addition, the central bank manages the government's exchange, remittance, and other banking operations. The central bank provides governments with short-term loans and advances when needed, as well as manages the country's public debt. We should also keep in mind that the central government can borrow any amount of money from the RBI by selling its currency securities to it.