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Questions
Explain "Banker to the Government" function of the Central Bank.
Explain 'government’s bank' function of central bank.
Explain the following function of an institution:
Banker to the Government.
Explain the function of the central bank as a ‘Banker’ to the government.
Solution 1
The Central Bank is also a banker, agent and financial advisor to the government. As a banker, it manages government accounts across the country. It buys and sells securities on behalf of the government as an agent of the government. It helps the government in framing policies to regulate the money market by acting as an advisor to the government.
Solution 2
The central bank acts as a ‘Banker’ to the Government and it performs the following functions:
- It receives deposits from the government and collects cheques and drafts deposited in the government account.
- It makes purchases and sales of government securities.
- It provides cash to the government as required for payment of salaries and wages to their staff and other disbursements.
- It makes payments on behalf of the government.
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