RBI acts as the banker to the central government as well as state governments.
Banker to the Government:
The Reserve Bank of India acts as a banker, agent, and financial advisor to the Central Government and all the State Governments.
As a banker, it carries out all banking business of the government.
- It maintains a current account to keep its cash balances.
- It accepts receipts and makes payments for the government and carries out exchange, remittance, and other banking operations.
- It also gives loans and advances to the government for temporary periods. The government borrows money by selling treasury bills to the Central Bank.
As an agent, the central bank also has the responsibility of managing the public debt.
As a financial advisor, the central bank advises the government from time to time on economic, financial, and monetary matters.